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Following my article about paywalls, a reader raised a point about “Tribes”. I’m paraphrasing the ensuing conversation we had, but I think it could be summarised as:

You’re wrong! The way to succeed on the internet is to build a tribe! Give your content away to the tribe! Grow the tribe!

An internet tribe is “an unofficial community of people who share a common interest, and usually who are loosely affiliated with each other through social media or other internet mechanisms”.

The use of the term dates back to 2003. More recently, Seth Godin wrote a book on the topic. As did Patrick Hanlon. A tribe could be characterized as a special interest group, a demographic, or a group of people interested in the same thing – plus internet.

So, is cultivating a tribe by giving everything away for free a better approach than locking information behind a paywall? If we lock some information away behind a paywall, does that mean we can’t build a tribe? BTW: I’m not suggesting Seth or Patrick assert such things, these issues came out of the conversation I had with the reader.

Well, It Depends

People don’t have to build a paywall in order to be successful. Or build a tribe in order to be successful. Either approach could be totally the wrong thing to do.

If anyone found the article on paywalls confusing, then hopefully I can clarify. The article about paywalls was an exploration. We looked at the merits, and pitfalls, involved.

Paywalls, like tribes, will not work for everyone. I suspect most people would agree that there is no “One True System” when it comes to internet marketing, which is why we write about a wide range of marketing ideas. Each idea is a tool people could use, depending on their goals and circumstances, but certainly not proposed as being one-size-fits all. In any case, having a paywall does not mean one cannot build a tribe. The two approaches aren’t mutually exclusive.

People may also recall The Well, the mother of all internet tribes. This tribe didn’t lead to profit for owners Salon. It was eventually sold it to it’s own users for a song. Salon, the parent company, has never been profitable. They have also tried various paywall models and free content models, although I think some of the free content looks very eHow: Driven by Demand Media.

With that in mind, let’s take a look at tribes and how to decide if a certain marketing approach is right for you.

Cart Before The Horse

“Cultivating a tribe” is a strategy.

Will everyone win using this strategy?

No.

Like any strategy, it should be justified by the business case. The idea behind tribes is that you form a group of people with similar interests, and then lead that group, and then, given appropriate and effective leadership, people help spread your message far and wide, grow the tribe, and eventually you will make money from them.

There is nothing wrong with this approach, and it works well for some businesses. However, like any marketing strategy, there is overhead involved. There is also an opportunity cost involved. And just like any marketing strategy, the success of the strategy should be measured in terms of return on investment. Is the cost of building, growing and maintaining a tribe lower than the return derived from it?

If not, then it fails.

How To Not Make Money From A Tribe

During the conversation I had with the reader, it was intimated that if someone can’t make money from a tribe, then it’s their own fault. After all, if someone can get a lot of people together by giving away their content, then money naturally follows, right?

The idea that profit is the natural result of building an audience resulted in the dot.com crash of 2000.

Many web companies at that time focused on building an audience first and worried about how it was all going to pay off later. Webvan, Pets.com, boo.com, and many of the rest didn’t suffer from lack of awareness, but from a lack of a sound business case and from a failure to execute.

We’ve had digital tribes, in various forms, since the beginning of the internet. Actually, they predate the internet . One early example of a digital tribe was the BBSs, a dial-in community. These tribes were replaced by internet forums and places, such as The Well.

Many internet forums don’t make a great deal of money. Many are run for fun at break-even, or a loss. Some make a lot of money. Whether they make a loss, a little money or a lot of money depends not on the existence of the tribe that surrounds them, as they all have tribes, but on the underlying business model.

Does the tribe translate into enough business activity in order to be profitable? How much is a large tribe of social-media aficionados interested in “free stuff” worth? More than a small demographic of Facebook-challenged people interested in high margin services? Creating a tribe to help target the latter group might possibly work, but there are probably better approaches to take.

Does SEOBook.com have a “tribe”? Should we always be looking to “grow the tribe”?

We don’t tend to characterize our approach in terms of tribes. At SEOBook.com, we do a lot of things to maintain a particular focus. We tend to write long, in-depth pieces on topics we hope people find interesting as opposed to chasing keyword terms. We don’t run an endless series of posts on optimizing meta tags. We don’t cover every tiny bit of search news. We focus almost exclusively on the needs of the intermediate-to-expert search professional. We could do many things to “grow the tribe”, but that would run counter to our objectives. It would dilute the offering. We could have a “free trial” but the noise it would create in our member forums would lower the value of the forums to existing community members.

We do offer some free tools available to everyone, but when it comes to the paid parts of the site we leave it up to individuals to decide if they think they’re a good fit for our community. If a person has issues with the site before becoming a paid member, we doubt they would ever becoming a long-lasting community member, so our customer service to people who have not yet become customers is effectively nil. In short, we don’t want to run the hamster treadmill of managing a huge tribe when it doesn’t support the business case.

The Good Things About Tribes

Tribes can help spread the word. People tell people something, and they tell people, and the audience grows and grows.

They’re great for political groups, movements, consultants, charities, and any endeavour with a strong social focus. They tend to suit sectors where the people in that sector spend a lot of time “living digitally”.

As a marketing approach, building tribes is well-suited to the charismatic, relentless self-promoter. A lot of tribes tend to orient around such individuals.

The Problems With Tribes

Not everyone can be a leader. Not everyone has got the time to be a relentless self-promoter and the time spent undertaking such activity can present a high opportunity cost if that’s not how your target market rolls. Perhaps a relentless focus on PPC, or SEO, or another channel will pay higher dividends.

There is also an ever-growing noise level in the social media channels, but the attention level remains relatively constant. The medium is forever being squeezed. Is blogging/facebooking/tweeting all day with the aim of building a tribe really a useful thing to be doing? Only metrics can tell us that, so make sure you monitor ‘em!

To build a big tribe in any competitive space takes serious work and it takes a long time. Many people will fail using that approach. Not only are some people not cut out to lead, the numbers don’t work if everyone used this method. If everyone who led a tribe also followed hundreds of other people leading their own tribes, then there simply aren’t enough hours in the day to get anything else done.

It will not be an efficient marketing approach for many.

Getting People To Follow Is Not The Goal Of Business

I know of a company that just got bought out for a few million.

Sounds great, right. However, I know they carry a lot of debt and their business model puts them on a downward trajectory. This site has a massive “tribe”. This site is number one in their niche. People tweet, Facebook, follow them, sing their praises, they engage up, down, left, right and center. They’ve got the internet tribe thing down pat, and their tribe buys their stuff.

One problem.

The business is based on low prices. The tribe is fixated on “getting a great price”. This business is vulnerable to competitors as that tribes loyalty, that took so long to build, is based on price – which is no loyalty at all. Perhaps they achieved their exit strategy, and did what they needed to do, but growing a massive and active internet tribe didn’t prevent them being swallowed by a larger competitor. The larger competitor doesn’t really have a tribe, but focuses on traditional channels.

Without getting the fundamentals right, a tribe, or any other marketing strategy, is unlikely to pay off. The danger in listening to gurus is they can be fadish. There is money in evangelizing the bright, shiny new marketing idea that sounds really good.

But beware of placing the cart before the horse. Marketing is a numbers game that comes down to ROI. Does building the tribe make enough money to justify serving the tribe?

Having followers is no bad thing. Just makes sure they’re the right followers, for the right reasons, and acquiring them supports a sound business case :)

“Information wants to be free” was a phrase coined by Stewart Brand, a counter-culture figure and publisher of the Whole Earth Catalog.

This was the context of the quote:

On the one hand information wants to be expensive, because it’s so valuable. The right information in the right place just changes your life. On the other hand, information wants to be free, because the cost of getting it out is getting lower and lower all the time. So you have these two fighting against each other

Brand talks about distribution cost, but not the production cost. Whatever our views on information freedom, I think everyone can agree that those who create information need to pay their bills. If creating information is how someone makes their living, then information must make an adequate return.

Information production is not free.

The distribution cost has been driven down to near zero on the internet, but it is the distributors, not content creators, who make most of the money. “Information wants to be free”, far from being an anti-corporate battle-cry, suits the business model of fat mega-corporations, like Google, who make money bundling “free” content and running advertising next to it. In this environment, the content creator can often struggle to make a satisfactory return.

So, content creators have been experimenting with models that reject the notion information must be free. One of these models involves the paywall, which we’ll examine today.

Content Disappearing Behind The Wall

More than 300 US dailies now have paywalls, and that number is growing. Big players, like the New York Times and the Financial Times, have reported increasing paid subscription numbers for their online content:

The FT reported that it has breached the 250,000 subscriber mark, having grown digital subscriptions 30% during the last year. The FT charges about $390 for an annual subscription to its website, which would indicate total digital subscription revenues of nearly $100 million if everyone was paying the full annual price. However, the actual total is almost certainly lower than that, since print subscribers pay discounted fee and not all subscriptions are annual. However, the performance is still impressive. The FT said 100,000 of those subscriptions are from corporations

Their paywall experiment appears to be paying off. However, critics are quick to point out that those newspapers enjoy an established reputation, and that lesser-known media outlets might have trouble emulating such success.

Certainly, this seems to be the case for the Rupert Murdoch owned “The Daily” which went belly-up due to poor subscription numbers:

The Daily, a boldly innovative publication – in the platform sense – is over. It’s never pleasant to see a newspaper of any form go under. However, there are lessons to be made from its birth, growth, and eventual demise that have wide implications for the content industry that are worth discussing.Here’s the raw truth: The Daily lost too much money and didn’t have a clear path to profitability, or something close to it. News Corp stated this succinctly, saying that the paper’s key problem was that it “could not find a large enough audience quickly enough to convince us the business model was sustainable in the long-term.

Even with the clout of News Corporation behind it, the Daily folded in less than two years. It was reportedly losing an estimated $30 million annually.

But was size was part of its problem? Did that paywall model fail due to high overhead and the relative inflexibility of a traditional media operation? Perhaps success involves leveraging off an existing reputation, innovation and running a tight ship?

Some smaller media start-ups have opted for the paywall approach. Well-known blogger Andrew Sullivan left the Daily Dish and went solo, offering readers a subscription based website.

Was this a big risk? Could Sullivan really make subscription content pay when the well-resourced Daily failed?

Sullivan did 333K in 24 hours.

Basically, we’ve gotten a third of a million dollars in 24 hours, with close to 12,000 paid subscribers [at last count],” Sullivan wrote today. “On average, readers paid almost $8 more than we asked for. To say we’re thrilled would obscure the depth of our gratitude and relief.

Sullivan doesn’t have the overhead of The Daily, so his break-even point is significantly lower. It looks like Sullivan may have hit on a model that works for him.

Another small media outfit, called The Magazine run by Marco Arment, started as an “IOS newstand publication for geeks”. Arment was known to his audience as he was the lead developer on Tumblr and and developer of Instapaper.

The Magazine publishes four articles every two weeks for $1.99 per month with a 7-day free trial. It started off as an app for the iPad but has since migrated to the web, but behind a paywall.

There’s room for another category between individuals and major publishers, and that’s where The Magazine sits. It’s a multi-author, truly modern digital magazine that can appeal to an audience bigger than a niche but smaller than the readership of The New York Times. This is what a modern magazine can be, not a 300 MB stack of static page images laid out manually by 100 people. The Magazine supports writers in the most basic, conventional way that, in the modern web context, actually seems least conventional and riskiest: by paying them to write. Since I’m keeping production costs low, I’m able to pay writers reasonably today, and very competitively with high-end print magazines in the future if The Magazine gets enough subscribers. A risk, but I’m confident. Here goes”

So how’s this niche publication doing?

Arment walked me through the numbers. He has 25,000 subscribers who pay $1.99 a month. Apple takes a 30 percent cut, leaving Arment about $35,000 a month.his cost of putting out the magazine is a bit over $20,000 per month. It comes out every two weeks, and each issue costs about $10,000. Roughly $4,000 goes to writers. The rest goes mostly to copy editors, illustrators, photographers and editors

Then there is Paul Carr, ex-Tech Crunch journalist who started NSFW Corporation, a web publication that has, up until recently, sat entirely behind a paywall. It’s a general interest and humor site that, by Pauls’ own admission, doesn’t need a ton of readers, just enough readers prepared to pay $3 a month for access so they can make money. He figures if he gets 30K paying subscribers, then that’s enough to break even.

Interestingly, he’s announced that they are diversifying into print. He claims NSFW will be profitable by the end of the year:

They’ll curse at SEO-driven headlines and at a public unwilling to pay even a few dollars for journalism that costs many thousand times that to produce. …….Rather than mourning the loss of long-form investigative pieces, we’re combining an online subscription model with ebooks and even print to make that kind of journalism profitable again. Instead of resorting to cheap tricks to jack up page views to sell another million belly fat ads, we’re inventing sponsorship products that provide more value to sponsors as editorial quality (not quantity) increases…..

It’s probably too early to draw many firm conclusions on the paywall experiment, although it’s clear that some operators are making it work.

News is a difficult form of content to monetarize on the web. It’s ephemeral, time-sensitive and ultimately disposable. However, if you’re providing educational and consultancy content, then it should be easier. If you do publish this type of content, how much of this should you be giving away? And if you do, what return are you getting back? Do you have a way to measure it?

The answers will be different for everyone, but they are interesting questions to consider. Many publishers are making paywalls work. And these people are making money from web content without exclusively pandering to flaky search engines in the hope some traffic may come their way.

The free content in exchange for free traffic “deal” is simply no longer worthwhile for many publishers.

Paywalls Are Hard

Paywalls are difficult to get right.

When “The Magazine” launched, it placed too much content behind the paywall, in the form of an app, meaning people couldn’t link to it. This meant the conversation was happening elsewhere.

I hastily built a basic site while I was waiting for the app to be approved. I only needed it to do two things: send people to the App Store, and show something at the sharing URLs for each article. Since The Magazine had no ads, and people could only subscribe in the app, I figured there was no reason to show full article text on the site — it could only lose money and dilute the value of subscribing. That was the biggest mistake I’ve made with The Magazine to date

The Magazine is now offering one free article view per month. The casual reader will still be able to assess the value and conversation and interaction can still happen, whilst most of the valuable content sits behind a paywall, helping ensure content creators paid.

Taking a different approach, The Times of London erected a “Berlin Wall”, locking content inside a fortress. How did that work out?

Not so well.

While the Times once had 10m monthly unique visitors, figures in September show that it has only managed to attract 100,000 digital-only subscribers, although print subscribers are able to access the site as well. As a result, Murdoch was recently forced to capitulate and allow Google and other search engines partial access to his content

When it comes to paywalls, mixed models appear to work best. Some content needs to appear where everyone can see it. Some content needs to appear in search engines and social media. The question is how much, and via what channel?

Some sites use a free-on-the-web model, whilst charging for mobile access. Other’s use a freemium model where some content is free in order to entice people to pay for premium content. One of the more successful models, of late, has been a metered approach.

The New York Times allows you to view five free pages if you come via a search engine because they get some referral revenue from the search sites. If you come to the site via Facebook, Twitter, blogs or other social media it does not count towards your monthly allowance

People don’t like to be forced into paying for content, but don’t seem to mind paying once the value has been demonstrated. One of the most successful apps in the Apple store, Angry Birds, enticed people to pay by giving the basic game away. Once they could see the value, people were more willing to pay.

Fred Wilson labels this “ex post facto monetization” — “you get paid after the fact, not before.” Under this strategy, you let people receive the value of your product first, then pay later — because they want to. Those who do sign up willingly are likely to be long-term, loyal customers. Those who never sign up probably haven’t discovered enough personal value and would have unsubscribed after a month even if they had initially been forced to subscribe

Paywalls can also be difficult to get right on a technical level. Some paywalls are porous in that the content can be seen so long as you know enough to jump through a few digital hoops:

When we launched our digital subscription plan we knew there were loopholes to access our content beyond the allotted number of articles each month. We have made some adjustments and will continue to make adjustments to optimize the gateway by implementing technical security solutions to prohibit abuse and protect the value of our content

However, even if some content does leak – and let’s face it, anything on the net can leak as a cut n’ paste is only a few keystrokes away – at least an expectation of payment is being established. The message is that this content has a value attached to it.

Another way of approaching it could be to make content available in formats that are more difficult to crawl and replicate, such as streaming video, or Kindle books. Here’s a guide on how to self-publish on the Kindle.

Think about different ways to make it difficult for scrapers to extract all your value easily.

Paywalls Are Strategic

Paywalls are not just a sign-up form and a payment gateway. Paywalls are also a publishing strategy.

How much are you prepared to give away for free? How does giving away this content pay off?

A consultant may publish far and wide for free. The pay-off is more consulting gigs. The consultancy “content” sits behind a paywall in that you have to pay for that service. Not many SEO consultants give their detailed analysis away for free. The content we see in the public domain on SEO is a tiny fraction of the information held by the professionals in our niche, and that information may want to be free, but the owners, wisely, hold onto most of it, else they wouldn’t eat.

Be wary about giving away your labour in exchange for “awareness”. Here’s a story about how The Atlantic tried to get a journalist to work for nothing.

From the Atlantic:

Thanks for responding. Maybe by the end of the week? 1,200 words? We unfortunately can’t pay you for it, but we do reach 13 million readers a month. I understand if that’s not a workable arrangement for you, I just wanted to see if you were interested.

Thanks so much again for your time. A great piece!

From me:

Thanks Olga:

I am a professional journalist who has made my living by writing for 25 years and am not in the habit of giving my services for free to for profit media outlets so they can make money by using my work and efforts by removing my ability to pay my bills and feed my children…..

Such arrangements suit the publisher, of course, but all the risk sits with the content creator. Sometimes, those deals can work if they lead to payment in some other form, but ensure you have a means to track the pay-off.

Another way of thinking about a paywall is a switch of channel. We’re seeing the rise and rise of mobile computing and, as it turns out, mobile consumers are much more willing to pay for content than people who browse the web:

The upshot: paid content, it seems, is alive and well, but some media categories are doing a lot better than others.Taking just the use of paid content on tablets in Q4 2011, Nielsen found that in the U.S., a majority of tablet owners have already paid for downloaded music, books and movies, with 62 percent, 58 percent and 51 percent respectively saying they have already made such purchases

Could your content be better off pitched to a mobile audience? Made into an app? Published and promoted as a Kindle book?

The Hamster Wheel

This is not to say leaving content out in the open can’t pay the bills. Perhaps you don’t feel a paywall is right for you, but you’re growing tired of running faster just to stay in the same place.

Brian Lam used to be the editor of Gizmodo, Gawker media’s gadget blog. Gizmodo was run on a model familiar to search marketers where you first find a keyword stream then capture that stream by writing keyword-driven articles.

He likens this approach to a hamster on a wheel as he relentlessly churned out copy in order to drive more and more traffic.

It led to burn-out.

He loved the ocean, but his frantic digital existence meant his surfboard was gathering cobwebs. “I came to hate the Web, hated chasing the next post or rewriting other people’s posts just for the traffic,” he told me. “People shouldn’t live like robots.

The problem with ad-supported media models, such as Adsense, is that they depend on scale. With advertising rates decreasing year by year as the market gets more and more fractured, content production increases just to keep pace.

Lam went in the opposite direction.

His new gadget site only posts 12 times a month, but goes deep. The majority of his income comes from Amazon’s affiliate program. He achieves a 10-20% click-thru rate.

Mr. Lam’s revenue is low, about $50,000 a month, but it’s doubling every quarter, enough to pay his freelancers, invest in the site and keep him in surfboards. And now he actually has time to ride them. In that sense, Mr. Lam is living out that initial dream of the Web: working from home, working with friends, making something that saves others time and money…..The clean, simple interface, without the clutter of news, is a tiny business; it has fewer than 350,000 unique visitors a month at a time when ad buyers are not much interested in anything less than 20 million.But The Wirecutter is not really in the ad business. The vast majority of its revenue comes from fees paid by affiliates, mostly Amazon, for referrals to their sites. As advertising rates continue to tumble, affiliate fees could end up underwriting more and more media businesses“

Is running on a search-driven hamster wheel, churning out more and more keyword content the most worthwhile use of your time? Lam is making more money by feeding the beast less in terms of quantity and going deep on quality.

Loss Leader For The Search Engines

But, hang on. This is an SEO site, isn’t it? Aren’t we all about getting content into the search engines and ranking well?

Of course.

SEO is still a great marketing channel, however this doesn’t mean to say everything we publish must appear in search engines. I hope this article prompts you to consider just how much you’re giving away compared to how much benefit you’re getting in return.

It all comes down to an ROI calculation. Does it cost me less to publish page X than I get in return? If you can publish pages cheaply enough, and if the traffic is worth enough, then great. If your publishing costs exceeds your return, then there are other models worth considering.

This article is mainly concerned with deep, researched, unique content that doesn’t have a trivial production cost attached to it. If the search engines don’t deliver enough value to make deep content creation worthwhile, then publishers must look beyond the “free” web model many have been using up until now in order to be sustainable.

Don’t let distributors suck out all your value so only they can grow fat. A paywall is more than a physical thing, it’s a strategy. If you publish a lot of valuable information that isn’t getting a reasonable return, then think about ways bundle that information into product form and ask yourself if you should keep it out of the search engines. Decide on your loss-leader content and create a sales funnel to ensure there is a payday at the end. The existence of content farms showed deep, free content often doesn’t pay. The way they made their content pay was to make it dirt cheap to produce and so useless that the advertising became the most relevant content on the page.

Content that relies heavily on search engine traffic is a high risk strategy. Some may recall a Mac site, called Cult Of Mac, that got hit by Panda. They were big enough, and connected enough, to have Google reinstate them, but the first comment in this thread tells it like it is:

It’s great news that Google reinstated Cult of Mac although that will not happen to other smaller genuine blogs and websites..

True, that.

It’s not enough to “publish quality content”. A lot of quality content gets hammered and tossed out of the search engines each day. And even if it stays listed, it may not make a return. There are no guarantees. Instead, build a brand and an audience. And then sell that audience something they can’t get for free.

Content may want to be free, but free doesn’t pay. For many publishers, the search engines aren’t giving enough back so be wary about how much you hand over to them.

What are the incentives to publish high-value content to the web?

Search engines, like Google, say they want to index quality content, but provide little incentive to create and publish it. The reality is that the publishing environment is risky, relatively poorly paid in most instances, and is constantly being undermined.

The Pact

There is little point publishing web content if the cost of publishing outweighs any profit that can be derived from it.

Many publishers, who have search engines in mind, work on an assumption that if they provide content to everyone, including Google, for free, then Google should provide traffic in return. It’s not an official deal, of course. It’s unspoken.

Rightly or wrongly, that’s the “deal” as many webmasters perceive it.

What Actually Happens

Search engines take your information and, if your information is judged sufficiently worthy that day, as the result of an ever-changing, obscure digital editorial mechanism known only to themselves, they will rank you highly, and you’ll receive traffic in return for your efforts.

That may all change tomorrow, of course.

What might also happen is that they could grab your information, amalgamate it, rank you further down the page, and use your information to keep visitors on their own properties.

Look at the case of Trip Advisor. Trip Advisor, frustrated with Google’s use of its travel and review data, filed a competition complaint against Google in 2012.

The company said: “We hope that the commission takes prompt corrective action to ensure a healthy and competitive online environment that will foster innovation across the internet.”

The commission has been investigating more than a dozen complaints against Google from rivals, including Microsoft, since November 2010, looking at claims that it discriminates against other services in its search results and manipulates them to promote its own products.

TripAdvisor’s hotel and restaurants review site competes with Google Places, which provides reviews and listings of local businesses.”We continue to see them putting Google Places results higher in the search results – higher on the page than other natural search results,” said Adam Medros, TripAdvisor’s vice president for product, in February. “What we are constantly vigilant about is that Google treats relevant content fairly.”

Similarly, newspapers have taken aim at Google and other search engines for aggregating their content, and deriving value from that aggregation, but the newspapers claim they aren’t making enough to cover the cost of producing that content in the first place:

In 2009 Rupert Murdoch called Google and other search engines “content kleptomaniacs”. Now cash-strapped newspapers want to put legal pressure on what they see as parasitical news aggregators.”

Of course, it’s not entirely the fault of search engines that newspapers are in decline. Their own aggregation model – bundling news, sport, lifestyle, classifieds topics – into one “place” has been surpassed.

Search engines often change their stance without warning, or can be cryptic about their intentions, often to the determent of content creators. For example, Google has stated they see ads as helpful, useful and informative:

In his argument, Cutts said, “We actually think our ads can be as helpful as the search results in some cases. And no, that’s not a new attitude.”

And again:

we firmly believe that ads can provide useful information

And again:

In entering the advertising market, Google tested our belief that highly relevant advertising can be as useful as search results or other forms of content

However, business models built around the ads as content idea, such as Suite101.com, got hammered. Google could argue these sites went too far, and that they are asserting editorial control, and that may be true, but such cases highlight the flaky and precarious nature of the search ecosystem as far as publishers are concerned. One day, what you’re doing is seemingly “good”, the next day it is “evil”. Punishment is swift and without trial.

Thom Yorke sums it up well:

In the days before we meet, he has been watching a box set of Adam Curtis’s BBC series, All Watched Over by Machines of Loving Grace, about the implications of our digitised future, so the arguments are fresh in his head. “We were so into the net around the time of Kid A,” he says. “Really thought it might be an amazing way of connecting and communicating. And then very quickly we started having meetings where people started talking about what we did as ‘content’. They would show us letters from big media companies offering us millions in some mobile phone deal or whatever it was, and they would say all they need is some content. I was like, what is this ‘content’ which you describe? Just a filling of time and space with stuff, emotion, so you can sell it?”

Having thought they were subverting the corporate music industry with In Rainbows, he now fears they were inadvertently playing into the hands of Apple and Google and the rest. “They have to keep commodifying things to keep the share price up, but in doing so they have made all content, including music and newspapers, worthless, in order to make their billions. And this is what we want? I still think it will be undermined in some way. It doesn’t make sense to me. Anyway, All Watched Over by Machines of Loving Grace. The commodification of human relationships through social networks. Amazing!

There is no question the value of content is being deprecated by big aggregation companies. The overhead of creating well-researched, thoughtful content is the same whether search engines value it or not. And if they do value it, a lot of the value of that content has shifted to the networks, distributors and aggregators and away from the creators.

Facebook’s value is based entirely on the network itself. Almost all of Google’s value is based on scraping and aggregating free content and placing advertising next to it. Little of this value gets distributed back to the creator, unless they take further, deliberate steps to try and capture some back.

In such a precarious environment, what incentive does the publisher have to invest and publish to the “free” web?

Content Deals

Google lives or dies on the relevancy of the information they provide to visitors. Without a steady supply of “free” information from third parties, they don’t have a business.

Of course, this information isn’t free to create. So if search engines do not provide you profitable traffic, then why allow search engines to crawl your pages? They cost you money in terms of bandwidth and may extract, and then re-purpose, the value you created to suit their own objectives.

Google has done content-related deals in the past. They did one in France in February whereby Google agreed to help publishers develop their digital units:

Under the deal, Google agreed to set up a fund, worth 60 million euroes, or $80 million, over three years, to help publishers develop their digital units. The two sides also pledged to deepen business ties, using Google’s online tools, in an effort to generate more online revenue for the publishers, who have struggled to counteract dwindling print revenue.

This seems to fit with Google’s algorithmic emphasis on major web properties, seemingly as a means to sift the “noise in the channel”. Such positioning favors big, established content providers.

It may have also been a forced move as Google would have wanted to avoid a protracted battle with European regulators. Whatever the case, Google doesn’t do content deals with small publishers and it could be said they are increasingly marginalizing them due to algorithm shifts that appear to favor larger web publishers over small players.

Don’t Be Evil To Whom?

Google’s infamous catch-phrase is “Don’t Be Evil”. In the documentary Inside Google”, Eric Schmidt initially thought the phrase was a joke. Soon after, he realized they took it seriously.

The problem with such a phrase is that it implies Google is a benevolent moral actor that cares about……what? You – the webmaster?

Sure.

“Don’t Be Evil” is typically used by Google in reference to users, not webmasters. In practice, it’s not even a question of morality, it’s a question of who to favor. Someone is going to lose, and if you’re a small webmaster with little clout, it’s likely to be you.

For example, Google appear to be kicking a lot of people out of Adsense, and as many webmasters are reporting, Google often act as judge, jury and executioner, without recourse. That’s a very strange way of treating business “partners”, unless partnership has some new definition of which I’m unaware.

It’s getting pretty poor when their own previously supportive ex-employees switch to damning their behavior:

But I think Google as an organization has moved on; they’re focussed now on market position, not making the world better. Which makes me sad. Google is too powerful, too arrogant, too entrenched to be worth our love. Let them defend themselves, I’d rather devote my emotional energy to the upstarts and startups. They deserve our passion.

Some may call such behavior a long way from “good” on the “good” vs “evil” spectrum.

How To Protect Value

Bottom line: if your business model involves creating valuable content, you’re going to need a strategy to protect it and claw value back from aggregators and networks in order for a content model to be sustainable.

Some argue that if you don’t like Google, then block them using robots.txt. This is one option, but there’s no doubt Google still provides some value – it’s just a matter of deciding where to draw the line on how much value to give away.

What Google offers is potential visitor attention. We need to acquire and hold enough visitor attention before we switch the visitors to desired action. An obvious way to do this, of course, is to provide free, attention grabbing content that offers some value, then lock the high value content away behind a paywall. Be careful about page length. As HubPages CEO Paul Edmonds points out:

Longer, richer pages are more expensive to create, but our data shows that as the quality of a page increases, its effective revenue decreases. There will have to be a pretty significant shift in traffic to higher quality pages to make them financially viable to create”

You should also consider giving the search engines summaries or the first section of an article, but block them from the rest.

Even if you decide to block search engines from indexing your content they still might pay others to re-purpose it:

I know a little bit about this because in January I was invited to a meeting at the A.P.’s headquarters with about two dozen other publishers, most of them from the print world, to discuss the formation of the consortium. TechCrunch has not joined at this time. Ironically, neither has the A.P., which has apparently decided to go its own way and fight the encroachments of the Web more aggressively (although, to my knowledge, it still uses Attributor’s technology). But at that meeting, which was organized by Attributor, a couple slides were shown that really brought home the point to everyone in the room. One showed a series of bar graphs estimating how much ad revenues splogs were making simply from the feeds of everyone in the room. (Note that this was just for sites taking extensive copies of articles, not simply quoting). The numbers ranged from $13 million (assuming a $.25 effective CPM) to $51 million (assuming a $1.00 eCPM)

You still end up facing the cost of policing “content re-purposing” – just one of the many costs publishers face when publishing on the web, and just one more area where the network is sucking out value.

Use multiple channels so you’re not reliant on one traffic provider. You might segment your approach by providing some value to one channel, and some value to another, but not all of it to both. This is not to say models entirely reliant on Google won’t work, but if you do rely on a constant supply of new visitors via Google, and if you don’t have the luxury of having sufficient brand reputation, then consider running multiple sites that use different optimization strategies so that the inevitable algorithm changes won’t take you out entirely. It’s a mistake to think Google cares deeply about your business.

Treat every new visitor as gold. Look for ways to lock visitors in so you aren’t reliant on Google in future for a constant stream of new traffic. Encourage bookmarking, email sign-ups, memberships, rewards – whatever it takes to keep them. Encourage people to talk about you across other media, such as social media. Look for ways to turn visitors into broadcasters.

Adopt a business model that leverages off your content. Many consultants write business books. They make some money from the books, but the books mainly serve as advertisements for their services or speaking engagements. Similarly, would you be better creating a book and publishing it on Amazon than publishing too much content to the web?

Business models focused on getting Google traffic and then monetarizing that attention using advertising only works if the advertising revenue covers production cost. Some sites make a lot of money this way, but big money content sites are in the minority. Given the low return of a lot of web advertising, other webmasters opt for cheap content production. But cheap content isn’t likely to get the attention required these days, unless you happen to be Wikipedia.

Perhaps a better approach for those starting out is to focus on building brand / engagement / awarenesss / publicity / non-search distribution. As Aaron points out:

…the sorts of things that PR folks & brand managers focus on. The reason being is that if you have those things…

• the incremental distribution helps subsidize the content creation & marketing costs
• many of the links happen automatically (such that you don’t need to spend as much on links & if/when you massage some other stuff in, it is mixed against a broader base of stuff)
• that incremental distribution provides leverage in terms of upstream product suppliers (eg: pricing leverage) or who you are able to partner with & how (think about Mint.com co-marketing with someone or the WhiteHouse doing a presentation with CreditCards.com … in addition to celebrity stuff & such … or think of all the ways Amazon can sell things: rentals, digital, physical, discounts via sites like Woot, higher margin high fashion on sites like Zappos, etc etc etc)
• as Google folds usage data & new signals in, you win
• as Google tracks users more aggressively (Android + Chrome + Kansas City ISP), you win
• if/when/as Google eventually puts some weight on social you win
• people are more likely to buy since they already know/trust you
• if anyone in your industry has a mobile app that is widely used & you are the lead site in the category you could either buy them out or be that app maker to gain further distribution
• Google engineers are less likely to curb you knowing that you have an audience of rabid fans & they are more likely to consider your view if you can mobilize that audience against “unjust editorial actions”

A lot of the most valuable content on this site is locked-up. We’d love to open this content up, but there is currently no model that sufficiently rewards publishers for doing so. This is the case across the web, and it’s the reason the most valuable content is not in Google.

It’s not in Google because Google, and the other search engines, don’t pay.

Fair? Unfair? Is there a better way? How can content providers – particularly newcomers – grow and prosper in such an environment?

Now is the best and exciting time to be in marketing. The new data-driven approaches and infrastructure to collect customer data are truly changing the marketing game, and there is incredible opportunity for those who act upon the new insights the data provides” – Mark Jeffrey, Kellog School Of Management

I think Jeffries is right – now is one of the best and exciting times to be in marketing!

It is now cheap and easy to measure marketing performance, so we are better able to spot and seize marketing opportunities. If we collect and analyze the right data, we will make better decisions, and increase the likelihood of success.

As Google makes their system harder to game using brute force tactics, the next generation of search marketing will be tightly integrated with traditional marketing metrics such as customer retention, churn, profitability, and customer lifetime value. If each visitor is going to be more expensive to acquire, then we need to make sure those visitors are worthwhile, and the more we engage visitors post-click, the more relevant our sites will appear to Google.

We’ll look at some important metrics to track and act upon.

But first….

Data-Driven Playing Field

There is another good reason why data-driven thinking should be something every search marketer should know about, even if some search marketers choose to take a different approach.

Google is a data-driven company.

If you want to figure out what Google is going to do next, then you need to think like a Googler.
Googlers think about – and act upon – data.

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Douglas Bowman, a designer at Google, left the company because he felt they placed too much reliance on data over intuition when it came to visual design decisions.

Yes, it’s true that a team at Google couldn’t decide between two blues, so they’re testing 41 shades between each blue to see which one performs better. I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case. I can’t operate in an environment like that. I’ve grown tired of debating such miniscule design decisions. There are more exciting design problems in this world to tackle

Regardless of whether you think acting on data or intuition is the right idea, if you can relate to the data-driven mindset and the company culture that results, you will better understand Google. Searcher satisfaction metrics are writ-large on Google’s radar and they will only get more refined and granular as time goes on.

Update Panda was all about user engagement issues. If a site does not engage users, it is less likely to rank well.

As Jim Boykin notes, Google are interested in the “long click”:

On the most basic level, Google could see how satisfied users were. To paraphrase Tolstoy, happy users were all the same. The best sign of their happiness was the “long click”. this occurred when someone went to a search result, ideally the top one, and did not return. That meant Google has successfully fulfilled the query. But unhappy users were unhappy in their own ways, most telling were the “short clicks” where a user followed a link and immediately returned to try again. “If people type something and then go and change their query, you could tell they aren’t happy,” says (Amit) Patel. “If they go to the next page of results, it’s a sign they’re not happy. You can use those signs that someone’s not happy with what we gave them to go back and study those cases and find places to improve search.

In terms of brand, the more well known you are, the more some of your traffic is going to be pre-qualified. Brand awareness can lower your bounce rate, which leads to better engagement signals.

Any site is going to have some arbitrary brand-related traffic and some generic search traffic. Where a site has good brand-related searches, those searches create positive engagement metrics which lift the whole of the site. The following chart is conceptual, but it drives the point home. As more branded traffic gets folded into the mix, aggregate engagement metrics improve.

If your site and business metrics look good in terms of visitor satisfaction – i.e. people are buying what you offer and/or reading what you have to say, and recommending you to their friends – it’s highly likely your relevancy signals will look positive to Google, too. People aren’t just arriving and clicking back. They are engaging, spending time, talking about you, and returning.

Repeat visits to your site, especially from logged-in Google users with credit cards on file, are yet another signal Google can look at to see that people like, demand and value what you offer.

Post-Panda, SEO is about the behavior of visitors post-click. In order to optimize for visitor satisfaction, we need to measure their behavior post-click and adjust our offering. A model that I’ve found works well in a post-Panda environment is a data-driven approach, often used in PPC. Yes, we still have to do link building and publish relevant pages, but we also have to focus on the behavior of users once they arrive. We collect and analyze behavior data and feed it back into our publication strategy to ensure we’re giving visitors exactly what they want.

What Is Data Driven Marketing?

Data driven marketing is, as the name suggests, the collection and analysis of data to provide insights into marketing strategies.

It’s a way to measure how relevant we are to the visitor, as the more relevant we are, the more positive our engagement metrics will be. A site can constantly be adapted, based on the behavior of previous visitors, in order to be made more even more relevant.

Everyone wins.

The process involves three phases. Setting up a framework to measure and analyze visitor behaviour, testing assumptions using visitor data, then optimizing content, channels and offers to maximize return. This process is used a lot in PPC.

Pre-web, this type of data used to be expensive to collect and analyse. Large companies engaged market researchers to run surveys, focus groups, and go out on the street to gather data.

These days, collecting input from consumers and adapting campaigns is as easy as firing up analytics and creating a process to observe behaviour and modify our approach based on the results. High-value data analysis and marketing can be done on small budgets.

Yet many companies still don’t do it.

And many of those that do aren’t measuring the right data. By capturing and analysing the right data, we put ourselves at a considerable advantage to most of our competitors.

In his book Data Driven Marketing, Jeffrey notes that the lower performing companies in the Fortune 500 were spending 4% less than the average on marketing, and the high performers were investing 20% more than average. Low performers focused on demand generation – sales, coupons, events – whereas high performers spend a lot more on brand and marketing infrastructure. Infrastructure includes the processes and software tools needed to capture and analyse marketing data.

So the more successful companies are spending more on tools and process than lower performing companies.

When it comes to the small/medium sized businesses, we have most of the tools we need readily available. Capturing and analyzing the right data is really about process and asking the right questions.

What Are The Right Questions?

We need a set of metrics that help us measure and optimize for visitor satisfaction.

Jeffrey identifies 15 data-analysis areas for marketers. Some of these metrics relate directly to search marketing, and some do not. However, it’s good to at least be aware of them as these are the metrics traditional marketing managers use, so might serve as inspiration get us thinking about where the cross-overs into search marketing lay. I recommend reading his book to anyone who wants a crash course in data-driven marketing and to better understand where how marketing managers think.

• Brand awareness
• Test Drive
• Churn
• Customer satisfaction
• Take rate
• Profit
• Net Present Value
• Internal Rate Of Return
• Payback
• Customer Lifetime Value
• Cost Per Click
• Transaction Conversion Rate
• Return On Ad Dollars Spent
• Bounce Rate
• Word Of Mouth (Social Media Reach)

I’ll re-define this list and focus on a few metrics we could realistically use that help us optimize sites and offers in terms of visitor engagement and satisfaction. As a bonus, we’ll likely create the right relevancy signature Google is looking for which will help us rank well. Most of these metrics come directly from PPC.

First, we need a…..dashboard! Obviously, a dashboard is a place where you can see how you’re progressing, at a glance, measured over time. There are plenty of third party offerings, or you can roll-your-own, but the important thing is to have one and use it. You need a means to measure where you are, and where you’re going in terms of visitor engagement.

1. Traffic Vs Leads

Traffic is a good metric for display and brand purposes. If a site is making money based on how many people see the site, then they will be tracking traffic.

For everyone else, combining the two can provide valuable insights. If traffic has increased, but the site is generating the same number of leads – or whatever your desired engagement action may be, but I’ll use the term “leads” to mean any desired action – then is that traffic worthwhile? Track how many leads are closed and this will tell you if the traffic is valuable. If the traffic is high, but engagement is low, then visitors are likely clicking back, and this is not a signal Google deems favorable.

This data is also the basis for adjusting and testing the offer and copy. Does engagement increase or decrease after you’ve adjusted the copy and/or the offer?

2. Search Channel Vs Other Channels

Does search traffic result in more leads than, say, social media traffic? Does it result in more leads vs any other channel? If so, then there is justification to increase spending on search marketing vs other channels.

Separate marketing channels out so you can compare and contrast.

3. Channel Growth

Is the SEM channel growing, staying the same, or declining vs other channels?

Set targets and incremental milestones. Create a process to adjust copy and offers and measure the results. The more conversions to desired action, the better your relevancy signal is likely to be, and the more you’ll be rewarded.

You can get quite granular with this metric. If certain pages are generating more leads than others as the direct result of keyword clicks, then you know which keyword areas to grow and exploit in order to grow the performance of the channel as a whole. It can be difficult to isolate if visitors skip from page to page, but it can give you a good idea which entry pages and keywords kick it all off.

4. Paid Vs Organic

If a search campaign is running both PPC and SEO, then split these two sources out. Perhaps SEO produces more leads. In which case, this will justify creating more blog posts, articles, link strategies, and so on.

If PPC produces more leads, then the money may be better spent on PPC traffic, optimizing offers and landing pages, and running A/B tests. Of course, the information gleaned here can be fed into your organic strategies. If the content works well in PPC, it is likely to work well in SEO, at least in terms of engagement.

5. Call To Action

How do you know if a call to action is working? Could the call to action be worded differently? Which version of the call to action works best? Which position does it work best? Does the color of the link make a difference?

This type of testing is common in PPC, but less so in SEO. If SEO pages are optimized in this manner, then we increase the level of engagement and reduce the click-back.

6. Returning Visitor

If all your visitors are new and never return, then your broader relevance signals aren’t likely to be great.

This doesn’t mean all sites must have a high number of return visitors in order to deemed relevant – one-off sales sites would be unlikely to have return visitors, yet a blog would – however, if your site is in a class of sites where every other site listed is receiving return visits, then your site is likely to suffer by comparison.

Measure the number of return visitors vs new visitors. Think about ways you can keep visitors coming back, especially if you suspect that your competitors have high return visitor rates.

7. Cost Per Click/Transaction Conversion Rate/Return On Ad Dollars Spent

PPC marketers are familiar with these metrics. We pay per click (CPC) and hope the visitor converts to desired action. We get a better idea of the effectiveness of keyword marketing when we combine this metric with transaction conversion rate (TCR) and return on ad dollars spent (ROA). TCR = transaction conversion rate; the percentage of customers who purchase after clicking through to your website. ROA = return on ad dollars spent.

These are good metrics for SEOs to get their heads around, too, especially when justifying SEO spends relative to other channels. For cost per click, use the going rate on Adwords and assign it to the organic keyword if you want to demonstrate value. If you’re getting visitors in at a lot lower price per click the SEO channel looks great. The cost-per-click in SEO is also the total cost of the SEO campaign divided by clicks over time.

8. Bounce Rate

Widely speculated to be an important metric post-Panda. Obviously, we want to get this rate down, Panda or not.

If you’re seeing good rankings but high bounce rates for pages it’s because the page content isn’t relevant enough. It might be relevant in terms of content as far as the algorithm sees it, but not relevant in terms of visitor intent. Such a page may drift down the rankings over time as a result, and it certainly doesn’t do other areas of your business any good

9. Word Of Mouth (Social Media Reach/Brand)

Are other people talking about you? Do they repeat your brand name? Do they do so often? If you can convince enough people to search for you based on your name, then you’ll “own” that word. Google must return your site, else they’ll be seen as lacking.

Measuring word-of-mouth used to be difficult but it’s become a lot easier, thanks to social media and the various information mining tools available. Aaron has written a lot on the impact of brand in SEO, so if this area is new to you, I’d recommend reading back through The Rise Of Brand Over Time, Big Brands and Potential Brand Signals For Panda.

10. Profit

It’s all about the bottom line.

If search marketers can demonstrate they add value to the bottom line, then they are much more likely to be retained and have budget increased. This isn’t directly related to Panda optimization, other than in the broad sense that the more profitable the business, the more likely they are keeping visitors satisfied.

Profit = revenue – cost. Does the search marketing campaign bring in more revenue that it costs to run? How will you measure and demonstrate this? Is the search marketing campaign focused on the most profitable products, or the least? Do you know which products and services are the most profitable to the business? What value does your client place on a visitor?

There is no one way of tracking this. It’s a case of being aware of the metric, then devising techniques to track it and add it to the dashboard.

11. Customer Lifetime Value

Some customers are more important than others. Some customers convert, buy the least profitable service or product, and we never hear from them again. Some buy the most profitable service or product, and return again and again.

Is the search campaign delivering more of the former, or the latter? Calculating this value can be difficult, and relies on internal systems within the company that the search marketer may not have access to, but if the company already has this information, then it can help validate the cost of search marketing campaigns and to focus campaigns on the keyword areas which offer the most return.

Some of these metrics don’t specifically relate to ranking, they’re about marketing value, but perhaps an illustration of how some of the traditional marketing metrics and those of search marketers are starting to overlap. The metrics I’ve outlined are just some of the many metrics we could use and I’d be interested to hear what other metrics you’re using, and how you’re using them.

Optimizing For Visitor Experience

If you test these metrics, then analyse and optimize your content and offers based on your findings, not only will this help the bottom line, but your signature on Google, in terms of visitor relevance, is likely to look positive because of what the visitor does post-click.

When we get this right, people are engaging. They are clicking on the link, they’re staying rather than clicking back, they’re clicking on a link on the page, they’re reading other pages, they’re interacting with our forms, they’re book-marking pages or telling others about our sites on social media. These are all engagement signals, and increased engagement tends to indicate greater relevance.

This is diving deeper than a traditional SEO-led marketing approach, which until quite recently worked, even if you only operated in the search channel and put SEO at the top of the funnel. It’s not just about the new user and the first visit, it’s also about the returning visitor and their level of engagement over time. The search visitor has a value way beyond that first click and browse.

Data-driven content and offer optimization is where SEO is going.

“Within search results, information tied to verified online profiles will be ranked higher than content without such verification, which will result in most users naturally clicking on the top (verified) results. The true cost of remaining anonymous, then, might be irrelevance.” – Eric Schmidt

Authoritarian Regimes & Data Mining

One wonders how Mr. Schmidt can balance the above statement along with warning about authoritarian governments.

And the risks from such data mining operations are not just in “those countries over there.” The ad networks that hire lobbyists to change foreign privacy laws do so such that they can better track people the globe over and deliver higher paying ads. (No problem so long as they don’t catch you on a day you are down and push ads for a mind numbing psychotropic drug with suicidal or homicidal side effects.)

And defense contractors are fast following with mining these social networks. (No problem so long as your name doesn’t match someone else’s that is on some terrorist list or such.)

Large & Anonymous

What’s crazy is when we get to the other end of the spectrum. Want to know if your hamburger has pink slime in it? Best of luck with that.

Then you get the mainstream media sites that get a free pass (size = trust) and it doesn’t matter if their content is created through…

• a syndicated partnership of with eHow-styled content (Demand Media)
• a syndicated partnership of scraped/compiled date (FindTheBest)
• auto-generated content from a bot (Narrative Science)
• scrape + outsourcing + plagiarism + fake bylines (Journatic)
• top 10 ways to regurgitate top 10 lists from 10 different angles (BuzzFeed)
• hatchet job that was written before manufacturing the “conforming” experience (example)
• factually incorrect hate bait irrelevant article with no author name, wrapped in ads for get rich quick scams (example)

… no matter how it is created, it is fine, so long as you have political influence. Not only will it rank, but it will be given a ranking boost based on being part of a large site, even if it is carpet bombed with irrelevant ads.

Coin Operated Ideals

But then the companies that claim this transparency is vital for society pull a George Costanza & “Do The Opposite” with their own approach.

Whenever they manipulate markets to their own benefit they claim the need for secrecy to stop spammers or protect privacy. But then they collect the same data & pass it along without consent to those who pay for the data.

When Google was caught vandalizing OpenStreetMaps or lying to businesses listed in Mocality, those were the acts of anonymous contractors. When Google got caught in a sting operation pushing ads for illegal steroids from Mexico they would claim that behavior didn’t reflect their current policies and that we need to move on.

Then of course there are the half dozen (or more) times that Google has violated their own search quality guidelines. So often that is due yet again to “outsourcing” or a partner of some sort. And they do that in spite of the ability to arbitrarily hardcode themselves in the result set.

If we don’t exam the faux ideals push to shift cultural norms we will end up with a crappier world to live in. Some Googlers (or Google fanbois) who read this will claim I am a broken record stuck in the past on this stuff. But those same people will be surprised x years down the road when something bizarre surfaces from an old deranged contact or prior life.

Anyone who has done anything meaningful has also done some things that are idiotic.

Is that sort of stuff always forever relevant or does it make sense at some point to move on?

When that person is Eric Schmidt, the people he pontificate to are blackballed for following his ideals.

After all, his ideals don’t actually apply to him.

In our infographic about the sausage factory that is online journalism, we had a throw away line about how companies were partnering with FindTheBest to auto-generate subdomains full of recycled content. Apparently, a person named Brandon who claims to work for FindTheBest didn’t think our information was accurate:

Hi Aaron,
My name is Brandon. I have been with FindTheBest since 2010 (right after our launch), and I am really bummed you posted this Infographic without reaching out to our team. We don’t scrape data. We have a 40 person+ product team that works very closely with manufacturers, companies, and professionals to create useful information in a free and fair playing field. We some times use whole government databases, but it takes hundreds-of-thousands of hours to produce this content. We have a product manager that owns up to all the content in their vertical and takes the creation and maintenance very seriously. If you have any questions for them about how a piece of content was created, you should go to our team page and shoot them a email. Users can edit almost any listing, and we spend a ton of time approving or rejecting those edits. We do work with large publishers (something I am really proud of), but we certainly do not publish the same exact content. We allow the publishers to customize and edit the data presentation (look, style, feel) but since the majority of the content we produce is the factual data, it probably does look a little similar. Should we change the data? Should we not share our awesome content with as many users as possible? Not sure I can trust the rest of your “facts”, but great graphics!

I thought it was only fair that we aired his view on the main blog.

…but then that got me into doing a bit of research about FindTheBest…

In the past when searching for an issue related to our TV I saw a SERP that looked like this

Those mashed sites were subdomains on trusted sites like VentureBeat & TechCrunch.

Graphically the comparison pages appear appealing, but how strong is the editorial?

How does Find The Best describe their offering?

In a VentureBeat post (a FindTheBest content syndication partner) FTB’s CEO Kevin O’Connor was quoted as saying: “‘Human’ is dirty — it’s not scalable.”

Hmm. Is that a counter view to the above claimed 40 person editorial research team? Let’s dig in.

Looking at the top listed categories on the homepage of Find The best I counted 497 different verticals. So at 40 people on the editorial team that would mean that each person managed a dozen different verticals (if one doesn’t count all the outreach and partnership buildings as part of editorial & one ignores the parallel sites for death records, grave locations, find the coupons, find the company & find the listing).

Google shows that they have indexed 35,000,000 pages from FindTheBest.com, so this would mean each employee has “curated” about 800,000 pages (which is at least 200,000 pages a year over the past 4 years). Assuming they work 200 days a year that means they ensure curation of at least 1,000 “high quality” pages per day (and this is just the stuff in Google’s index on the main site…not including the stuff that is yet to be indexed, stuff indexed on 3rd party websites, or stuff indexed on FindTheCompanies.com, FindTheCoupons.com, FindTheListing, FindTheBest.es, FindTheBest.or.kr, or the death records or grave location sites).

Maybe I am still wrong to consider it a bulk scrape job. After all, it is not unreasonable to expect that a single person can edit 5,000 pages of high quality content daily.

Errr….then again…how many pages can you edit in a day?

Where they lost me though was with the “facts” angle. Speaking of not trusting the rest of “facts” … how crappy is the business information for SEO Book on FindTheBest that mentions that our site launched in 2011, we have $58,000 in sales, and we are a book wholesaler.

I realize I am afforded the opportunity to work for free to fix the errors of the scrape job, but if a page is full of automated incorrect trash then maybe it shouldn’t exist in the first place.

I am not saying that all pages on these sites are trash (some may be genuinely helpful), but I know if I automated content to the extent FTB does & then mass email other sites for syndication partnerships on the duplicate content (often full of incorrect information) that Google would have burned it to the ground already. They likely benefit from their CEO having sold DoubleClick to Google in the past & are exempt from the guidelines & editorial discrimination that the independent webmaster must deal with.

One of the ways you can tell if a company really cares about their product is by seeing if they dogfood it themselves.

Out of curiousity, I looked up FindTheBest on their FindTheCompany site.

They double-list themselves and neither profile is filled out.

That is like having 2 sentence of text on your “about us” page surrounded by 3 AdSense blocks. :D

I think they should worry about fixing the grotesque errors before worrying about “sharing with as many people as possible” but maybe I am just old fashioned.

Certainly they took a different approach … one that I am sure that would get me burned if I tried it. An example sampling of some partner sites…

• accountants.entrepreneur.com
• acronyms.sciencedaily.com
• alternative-fuel.cleantechnica.com
• analytics-software.businessknowhow.com
• antivirus.betanews.com
• apps.edudemic.com
• atvs.agriculture.com
• autopedia.com/TireSchool/
• autos.nydailynews.com
• backup-software.venturebeat.com
• bags.golfdigest.com
• beer.womenshealthmag.com
• best-run-states.247wallst.com
• bestcolleges.collegenews.com
• bikes.cxmagazine.com
• bikes.triathlete.com
• birds.findthelisting.com
• birth-control.shape.com
• brands.goodguide.com
• breast-pumps.parenting.com
• broker-dealers.minyanville.com
• businessschools.college-scholarships.com
• camcorders.techcrunch.com
• cars.pricequotes.com
• cats.petharbor.com
• catskiing.tetongravity.com
• chemical-elements.sciencedaily.com
• comets-astroids.sciencedaily.com
• companies.findthecompany.com
• companies.goodguide.com
• compare-video-editing-software.burnworld.com
• compare.consumerbell.com
• compare.guns.com
• compare.roadcyclinguk.com
• comparemotorbikes.motorbike-search-engine.co.uk
• congressional-lookup.nationaljournal.com
• courses.golfdigest.com
• crm.venturebeat.com
• cyclocross-bikes.cyclingdirt.org
• dealers.gundigest.com
• death-record.com
• debt.humanevents.com
• design-software.underworldmagazines.com
• destination-finder.fishtrack.com
• diet-programs.shape.com
• digital-cameras.techcrunch.com
• dinosaurs.sciencedaily.com
• dirt-bikes.cycleworld.com
• dogbreeds.petmd.com
• dogs.petharbor.com
• donors.csmonitor.com
• e-readers.techcrunch.com
• earmarks.humanevents.com
• earthquakes.sciencedaily.com
• ehr-software.technewsworld.com
• fallacies.sciencedaily.com
• fec-candidates.theblaze.com
• fec-committees.theblaze.com
• federal-debt.nationaljournal.com
• fha-condos.realtor.org
• fha.nuwireinvestor.com
• financial-advisors.minyanville.com
• findthebest.com
• findthebest.motorcycleshows.com
• findthecoupons.com
• findthedata.com
• firms.privateequity.com
• franchises.fastfood.com
• ftb.cebotics.com
• game-consoles.tecca.com
• game-consoles.venturebeat.com
• gin.drinkhacker.com
• golf-courses.bunkershot.com
• gps-navigation.techcrunch.com
• gps-navigation.venturebeat.com
• green-cars.cleantechnica.com
• guns.dailycaller.com
• ham-radio.radiotower.com
• hdtv.techcrunch.com
• hdtv.venturebeat.com
• headphones.techcrunch.com
• headphones.venturebeat.com
• high-chairs.parenting.com
• highest-mountains.sciencedaily.com
• hiv-stats.realclearworld.com
• horsebreeds.petmd.com
• hospital-ratings.lifescript.com
• hr-jobs.findthelistings.com
• inventors.sciencedaily.com
• investment-advisors.minyanville.com
• investment-banks.minyanville.com
• iv-housing.dailynexus.com
• laptops.mobiletechreview.com
• laptops.techcrunch.com
• laptops.venturebeat.com
• lawschool.lawschoolexpert.com
• locategrave.org
• mammography-screening-centers.lifescript.com
• mba-programs.dealbreaker.com
• medigap-policies.findthedata.org
• military-branches.nationaljournal.com
• motorcycles.cycleworld.com
• mountain-bikes.outsideonline.com
• nannies.com
• nobel-prize-winners.sciencedaily.com
• nursing-homes.caregiverlist.com
• nursing-homes.silvercensus.com
• onlinecolleges.collegenews.com
• phones.androidauthority.com
• pickups.agriculture.com
• planets.realclearscience.com
• planets.sciencedaily.com
• plants.backyardgardener.com
• presidential-candidates.theblaze.com
• presidents.nationaljournal.com
• privateschools.parentinginformed.com
• processors.betanews.com
• project-management-software.venturebeat.com
• projectors.techcrunch.com
• pushcarts.golfdigest.com
• recovery-and-reinvestment-act.theblaze.com
• religions.theblaze.com
• reviews.creditcardadvice.com
• saving-accounts.bankingadvice.com
• sb-marinas.noozhawk.com
• sb-nonprofits.noozhawk.com
• scheduling-software.venturebeat.com
• scholarships.savingforcollege.com
• schools.nycprivateschoolsblog.com
• scooters.cycleworld.com
• smartphones.techcrunch.com
• smartphones.venturebeat.com
• solarpanels.motherearthnews.com
• sports-drinks.flotrack.org
• stables.thehorse.com
• state-economic-facts.nationaljournal.com
• steppers.shape.com
• strollers.parenting.com
• supplements.womenshealthmag.com
• tablets.androidauthority.com
• tablets.techcrunch.com
• tablets.venturebeat.com
• tabletsandstuff.com/tablet-comparison-chart
• tallest-buildings.sciencedaily.com
• technology.searchenginewatch.com
• telescopes.universetoday.com
• tequila.proof66.com
• texas-golf-courses.texasoutside.com
• tires.agriculture.com
• tractors.agriculture.com
• tsunamies.sciencedaily.com
• us-hurricanes.sciencedaily.com
• video-cameras.venturebeat.com
• volcanic-eruptions.com
• waterheaters.motherearthnews.com
• wetsuits.swellinfo.com
• whiskey.cocktailenthusiast.com
• whiskey.drinkoftheweek.com
• white-house-visitors.theblaze.com
• wineries.womenshealthmag.com

we have seen search results where a search engine didn’t robots.txt something out, or somebody takes a cookie cutter affiliate feed, they just warm it up and slap it out, there is no value add, there is no original content there and they say search results or some comparison shopping sites don’t put a lot of work into making it a useful site. They don’t add value. – Matt Cutts

That syndication partnership network also explains part of how FTB is able to get so many pages indexed by Google, as each of those syndication sources is linking back at FTB on (what I believe to be) every single page of the subdomains, and many of these subdomains are linked to from sitewide sidebar or footer links on the PR7 & PR8 tech blogs.

And so the PageRank shall flow ;)

Hundreds of thousands of hours (eg 200,000+) for 40 people is 5,000 hours per person. Considering that there are an average of 2,000 hours per work year, this would imply each employee spent 2.5 full years of work on this single aspect of the job. And that is if one ignores the (hundreds of?) millions of content pages on other sites.

How does TechCrunch describe the FTB partnership?

Here’s one reason to be excited: In its own small way, it combats the recent flood of crappy infographics. Most TechCrunch writers hate the infographics that show up in our inboxes— not because infographics have to be terrible, but because they’re often created by firms that are biased, have little expertise in the subject of the infographic, or both, so they pull random data from random sources to make their point.

Get that folks? TechCrunch hosting automated subdomains of syndicated content means less bad infographics. And more cat lives saved. Or something like that.

How does FTB describe this opportunity for publishers?

The gadget comparisons we built for TechCrunch are sticky and interactive resources comprised of thousands of SEO optimized pages. They help over 1 million visitors per month make informed decisions by providing accurate, clear and useful data.

SEO optimized pages? Hmm.

Your comparisons will include thousands of long-tail keywords and question/answer pages to ensure traffic is driven by a number of different search queries. Our proprietary Data Content Platform uses a mesh linking structure that maximizes the amount of pages indexed by search engines. Each month—mainly through organic search—our comparisons add millions of unique visitors to our partner’s websites.

Thousands of long-tail keyord & QnA pages? Mesh linking structure? Hmm.

If we expand the “view more” section at the footer of the page, what do we find?

Holy Batman.

Sorry that font is so small, the text needed reduced multiple sizes in order to fit on my extra large monitor, and then reduced again to fit the width of our blog.

Each listing in a comparison has a number of associated questions created around the data we collect.

For example, we collect data on the battery life of the Apple iPad.

An algorithm creates the question “How long does the Apple iPad tablet battery last?” and answers it

So now we have bots asking themselves questions that they answer themselves & then stuffing that in the index as content?

Yeah, sounds like human-driven editorial.

After all, it’s not like there are placeholder tokens on the auto-generated stuff

{parent_field}

Ooops.

Looks like I was wrong on that.

And automated “popular searches” pages? Nice!

As outrageous as the above is, they include undisclosed affiliate links in the content, and provided badge-based “awards” for things like the best casual dating sites, to help build links into their site.

That in turn led to them getting a bunch of porn backlinks.

If you submit an article to an article directory and someone else picks it up & posts it to a sketchy site you are a link spammer responsible for the actions of a third party.

But if you rate the best casual dating sites and get spammy porn links you are wonderful.

Content farming never really goes away. It only becomes more corporate.

A marketing plan is a document that outlines a set of actions necessary in order to meet specific objectives.

It’s one of those things many of us, especially those who have been doing search marketing for a while, probably keep largely in our heads. We know roughly where we’re going, the strategies needed to get there, and the objective is to get great rankings and increased traffic. So who needs to write it down?

Here’s a couple of good reasons.

Writing forces an analytic approach. The act of writing something down often brings about new ideas because it gets us out of the routine of “just doing”. Secondly, writing plans helps us write better proposals. A marketing plan is about both an analysis and a form of communication. It’s a means to get across your ideas to clients and other partners and convince them of the merits of what we’re doing.

If your clients are anything above small business level, then they likely already have formal marketing plans, of which search marketing is a part, so doing this sort of planning makes us better able to talk their language.

This post looks at the steps involved in writing a marketing plan, and how to optimize it so it will be most effective.

What Is A Marketing Plan?

A marketing plan:

• provides an analysis of the current situation
• lists goals
• outlines strategies, tactics and recommendations to achieve those goals

Above all, a marketing plan is a recommendation for a course of action.

How To Write A Marketing Plan

A marketing plan should cover the following topics:

• Summary & Recommendations
• Situation analysis
• Objectives
• Budget
• Strategy
• Execution
• Evaluation

The summary and recommendations outline the state of the market and your recommendations for achieving goals. The rest of your document supports these recommendations.

A situation analysis covers what is happening both inside and outside the company – the internal and external conditions. There are various methods of defining these conditions including SWOT analysis, Five Forces, and 5Cs. Whatever method you choose, they will include these three areas:

• The Customer
• The Competitors
• The Company

Customer: A company must serve the interests of the customer. What does the customer need?

Competitor: What do competitors offer? What are the points of difference between their company and yours? Do they serve the needs to the customer well? In what areas don’t they serve the needs of customers?

The Company – what makes sense in terms of existing resources? Could the company restructure to meet marketing goals? Could some product and service lines be switched?

A situation analysis is typically detailed and draws a picture of the state of play right now. It’s a list of known facts about internal and external forces.

The situation analysis is where you are now, the objectives are where you want to be and when. Objectives, as far as a business is concerned, are typically about the bottom line and increasing profitability.

Search marketers often think of micro-objectives in terms of rankings and positioning, but a question a client is much more interested in is how this ranking or positioning effort supports the macro-objective: greater profitability?

A high ranking might lead to more inquiries, and inquiries convert at X%, which are worth, on average, $X to the business. Once you link search marketing objectives to business objectives it’s a lot easier to sell search marketing and convince people of your strategies, particularly to decision makers.

Objectives such as convert x % more customers, get x more customers to landing page y, get x% more signups are all valid marketing goals as they are quantitative and therefore concrete. “Getting higher rankings” may be measurable, but it doesn’t, in itself, align with a business goal. If we can marry those two things together – rankings and higher profits – then search becomes an easy sell.

Traffic is another measurement we could use, or break it down further into types of traffic i.e. tightly targeted vs loosely targeted traffic. Whilst these facts may be difficult to pin down, this type of analysis helps people think about exactly how much each visitor is worth to them, and why. If each visitor has measurable value, then the value of search marketing plans are easy to prove, so long as the total search marketing spend is lower than the added value the visitors represent. One way to illustrate this potential is by using Google Adwords search volume data, or for a more accurate barometer – a trial PPC campaign run against desired keywords.

Budget: How much will the plan cost to execute? Once you can demonstrate the value of search traffic, then it becomes easier for a company to allocate budget.

Strategy: the nuts and bolts of how you will achieve your goals. In search marketing, this is typically split into two areas, PPC and SEO. A marketing plan typically doesn’t go into exact detail in terms of ranking and positioning technique. Keep it high level, else it’s likely to confuse, or people are likely to get bogged down in unnecessary detail.

Execution: Define who is responsible for what and when. Include milestones.

Evaluation: Evaluation is critical in that you need to establish if the plan is on target to meet goals, or has met goals. If not, then you may need to revise goals and strategy in order to get the plan back on track.

Planning often seems dry, but the very act of putting together a marketing plan will help give you fresh ideas, help clarify your approach, and makes it all easier to communicate with stakeholders.

One problem at this stage is that the marketing plan is likely to be a dull read. I’ve seen chunky marketing plans that never get read – a lot of managers appear to just read the summary on such documents – because they are too dense. In the next section, we’ll look at ways to optimize marketing plans so that people will read them, remember them, and get enthusiastic about them.

It’s useful to split out the phases and a different type of thinking is required for each. Phase one is an analysis – a list of what is happening now. Phase two is all about strategy and tactics. It’s all about “how”. Phase three is about communication and getting people on side. It’s about making specific recommendations backed by analysis and strategy.

Optimizing Your Marketing Plan

Think of your audience. What would you want to see if you were reading a marketing plan?

You’d want to know what needs to be done, and even more importantly, why this is the best course of action. Recommendations need to be anchored by solid analysis and presentation of facts. If you assert something as a recommendation, ask yourself what questions such a recommendation invites, then have the facts to back them up. Always answer the “why are we doing this?” question.

A good way of engaging people is to use a story format. Stories pull people in as they have internal consistency whereby one sentence logically leads to another. A story is simply this: something that moves from status quo (your analysis), to a problem that must be resolved (the customers needs), to a new status quo. Show how you resolve that problem (target the customer and deliver what they need).

Example Marketing Plan

Some marketing plans are long and detailed, but that doesn’t need to be the case, especially on small, contained projects. Here’s an example of a brief marketing plan incorporating each of the steps outlined above.

Example:

Many people want to travel by private plane, but can’t afford it.

Many private planes sit idle, or make return journeys with no one on them. PrivateJet Inc has adapted their existing booking system to provide a service whereby people can book a seat on a private plane just like they can on a regular airline. When carriers have spare capacity, they post it to the system, and pre-approved customers who want to book a seat can easily do so.

Currently, private plane operators don’t have an easy way of making their spare capacity available, except as charters. There are no direct competitors in the private “book a seat” market. People who wish to travel on private aircraft don’t have an easy way of accessing this type of travel. There is space in the market for a nationwide booking system that pre-screens appropriate passengers and matches them up with available planes, much like a conventional aircraft booking system. PrivateJet Inc has this system, and this plan outlines a plan to reach our identified market segment of prospective cash-rich but time poor business customers who can’t afford to own or charter a private plane but would benefit from the convenience of being able to book a seat on one. Private Jet Inc already have a number of private aircraft operators lined up to provide the service.

The goal is to sign-up 2,000 interested members of the public to the prospects database by July 20th. We plan to achieve this goal by using pay per click advertising on Google. The budget for this activity is is $15,000. We’ve noted that there is significant search volume for “private plane charter” and various related keywords, so feel confident on achieving this goal given we an estimated conversion rate of 5%. We intend to set-up specific landing pages for each group of related keyword terms explaining the offer and requesting interested users sign up to our mailing list.

Search Inc will implement the plan immediately and report progress to PrivateJet Inc on a weekly basis. By July, PrivateJet will have 2,000 interested members signed up to their prospect database.

That’s a very simple plan for the purposes of illustration. Marketing plans are typically significantly longer and more detailed, but they will follow that same basic structure. It’s clear what the problem is, how it will be addressed, by whom, and when things will happen.

Further Reading:

• How To Write A Marketing Plan – Inc
• Sample Marketing Plans
• Quick MBA Marketing Plan Outline

Are you planning on starting a new website but want to gauge how profitable the industry sector is before you do? Are you optimizing a site for a client but want to gain a better understanding of the industry in which they operate? Conducting an industry analysis will help identify advantages and any weaknesses a business may have in that industry, and clarify the forces that shape that industry. The better we understand the industry, the more likely we are to grasp the opportunities others may miss.

If a business has a weak position relative to their competitors then optimization efforts might be ineffective as customers will simply click a few different search results and compare offerings.

Then again, a business may enjoy advantages in areas that aren’t currently being exploited. Focusing your optimization and positioning efforts in these areas will likely pay higher dividends than optimizing in areas where competitors are strongest. Understanding the forces at work in the industry will help reveal these areas.

I like to analyze industries prior to the optimization process as I find I get a lot of ideas just by breaking the industry down into component parts. Where is the profit in this industry? Is this industry growing quickly? If so, should the emphasis be on acquiring new customers? Or is it stagnant, in which case should the emphasis be on taking market share from competitors? What areas do competitors focus on? What areas do they miss? Where are competitors most vulnerable?

There are various frameworks for conducting an industry analysis. You may have heard of a SWOT analysis, but today we’ll take a look at Porter’s Five Forces analysis.

Why Industry Analysis Is Useful

If you were examining the web design industry, you’d soon come across crowdsourcing sites, such as 99designs.

The existence of these types of sites signal a power imbalance in the design industry. The customer has significant power in that they can request that professional designers submit near-finished work in order to compete for their business.

Some may argue that this is a marketing cost for designers – a way to advertise and get in front of people, but however we look at it, it soon becomes clear the profitability of the web design industry is constrained by two forces: the power of buyers and the low barrier to entry to new competitors. Just about anyone can set-up shop as a web designer. Since suppliers are plentiful, the buyers can easily play the suppliers off against one another – quite literally, in the case of 99designs!

Once we understand these industry forces, we could alter our plan of attack if we were marketing a web design agency. One possible approach would be to focus on geographical advantages. If you’re a web designer based in New York, you’re probably going to get more work out of New York based firms than if you lived in Oklahoma. A marketing campaign that emphasizes the unique selling point of physical location might work well in that it mitigates a force that is strong and operates against them i.e. the number of competitors. If they focus on local, they’ll be competing with local designers, not designers from all over the country, or around the world. Such a business might make a big deal of the fact they’ll come and see their clients face-to-face, their centrally located offices, their geographic location, and the fact they have local knowledge and contacts.

That unique selling point is determined once we’ve made an effort to understand the forces at work in the industry.

The Five Forces

The five forces are:

• The Power Of Suppliers
• The Power Of Buyers
• Barriers To Entry
• Competitive Rivalry
• The Availability Of Substitutes

If there are unfavourable power imbalances in a few of those forces, then the industry as a whole is likely to have profitability problems that need to be countered. Here is a further breakdown of these areas, as well as a five forces worksheet.

Let’s compare our web design agency against those five forces.

Power Of Suppliers? Suppliers being people who supply the web businesses with anything they need to produce their output. Suppliers, such as graphics software vendors, have virtually no power in the web design industry. A web designer needs a computer, office space and software, all of which are commodity items. Supply risk is therefore not a significant threat to the profitability of web designer businesses.

The Power Of Buyers? High. Buyers have a lot of choice as the industry is saturated with suppliers.

Barriers To Entry? Low. Anyone with a computer, design skills, and an internet connection can compete.

Competitive Rivalry? Medium/High. There are a lot of agencies chasing prestige work and may take a loss to land work from name companies. This gives them bragging rights and the association may help future marketing efforts.

The Availability Of Substitutes? Medium. A website is a marketing channel. A company could decide to spend money on other channels. They could substitute web design spend for some other marketing spend.

This industry clearly has profitability challenges. By emphasizing local, and a high touch service, a design firm could counter the competitive rivalry force and the barrier to entry force to some degree, and thus limit the power of buyers by focusing on buyers who place high value on face-to-face meetings. That’s just one idea, I’m sure you can think of a few more, but notice how easily these ideas spring to mind once you have a good idea of the forces at work in the industry.

How To Make A Five Forces Analysis

Define The Industry:

• What are the geographic boundaries of this industry?
• What products and/or services are in this industry?

Define The Players:

• Who are the buyers?
• Who are the suppliers?
• Who are the competitors?
• What are the substitutes?
• Who are the potential entrants?

What are the drivers of each competitive force? Grade them on relative weakness vs strength. Make a note of why they are either weak or strong.

Determine Industry Structure

• Why is this industry profitable?
• What forces make it profitable?
• Are some competitors better positioned in terms of the five forces than others?

Analyze Changes

• Which forces are changing now, or likely to change in future? Can your business bring about any of these changes? Can your competitors?

Digging Deeper

A common mistake when undertaking this analysis is to define competition too narrowly. Competition is often deemed to be “the other guy who offers the same service”, and that’s the end of it.

By examining each force, we gain a more thorough understanding of how competition works in the industry. This can be useful when constructing an seo/sem campaign, as you may be able to find weak forces in one or more areas that you can exploit. For example, one opportunity might be substitute products. What is your clients product or service a substitute for? You could then target the existing customers of another substitute product or service and encourage them to switch.

Why Five?

The five forces help determine the potential of an industry as they keep us from focusing on any one element. We need to consider all elements in order to get a better idea of industry profitability.

For example, we may note that an industry is growing quickly, but if we disregard the fact there is no barrier to entry, we might overestimate the profit potential. The search marketing industry has been growing quickly, but there are no barriers to entry, so this shifts a lot of power to the buyer and away from suppliers. It’s also an industry where numerous substitution options exist i.e. there are numerous internet marketing channels, and it’s possible some customers will get more bang for their buck using other channels.

The five factors strategy helps us see how much profit is bargained away to customers and suppliers. We focus on structural considerations as a whole, as opposed to isolated factors.

Defining The Industry

It can often be difficult to determine the industry boundaries.

An industry can be defined too broadly or too narrowly. For example, an analysis of the web marketing industry may determine it is global, however marketing is often highly dependent on cultural aspects. A more narrow industry definition, including regionality and geographical factors, might be more applicable when it comes to quantifying the level of competition. The marketing industry in the USA is a different “industry” from the marketing industry in France as most marketing activity undertaken in the US is conducted by US based marketing companies, and very little by suppliers from France. Therefore, the supplier in France and the supplier in the US are in “different” industries from a competitive standpoint. One does not compete directly with the other as their focus is likely to be on their own geographic markets.

There are two main factors in deciding industry boundaries:

• Scope of the products or services
• Geographical boundaries. Does competition take place globally, or is it regional?

You can use the five forces to help determine the industry boundaries. If the industry structure is the same i.e. same buyers, same suppliers, barriers to entry, and so on, then treat it as the same industry. If the industry forces are different, then treat it as a separate industry for the purposes of this analysis.

Are soft drinks for the home and soft drinks for corporate buyers – such as McDonalds – the same industry for the purposes of analysis? Possibly not. Soft drinks to consumers are heavily marketed on b2c channels and packaged in small, individual containers. Distribution needs to be very wide to get each of these small containers physically close to the consumers. Into vending machines, for example. Sales of soft drinks to corporate buyers, however, are likely to occur via b2b channels, where purchasing is done strategically and delivery is in the form of bulk syrup. The forces are quite different, even though product is exactly the same.

Barrier To Entry

When the barrier to entry is low, incumbents must hold down their prices or boost investment to deter new entrants. The way to counter a low barrier to entry force is attempt to raise it.

Anyone can make a burger, and anyone can get into the burger making business, but few could compete with McDonalds. McDonalds counter the low barrier to entry force by buying up well-positioned locations, operating at significant scale to keep prices low, and investing heavily in brand awareness. This raises the barrier to entry for anyone trying to offer something similar to McDonalds.

Many SEO companies spend a lot of time at conferences and keeping their names “out there”, which goes some way to counter the low barrier to entry in a business where just about anyone can call themselves an SEO. Software companies will likely invest heavily in features, R&D or service levels to ensure new entrants have a steep hill to climb in order to compete.

If the barriers to entry are low, then the threat of entry is high, which in turn limits profitability unless demand in the industry is growing faster than supply. Some businesses, like McDonalds, will counter this force with sheer scale, driving down the cost per unit. You can only compete with McDonalds pricing and convenience advantages if you do so at scale, and that scale is expensive. New entrant competitors in the burger business often position in areas where McDonalds are weakest i.e. offering gourmet burgers that that might cost more, but aren’t generic. Competitors could make a big deal about being small.

The advantages of economies of scale can be found throughout the value chain and the reason why companies tend to get bigger – they have to – else they put themselves at ongoing risk from new entrants.

The downside risk for these companies is that they can’t change and adapt quickly. It’s like trying to maneuver a container ship, whilst the small business can change direction on a whim. The small business is like the speedboat, the big business is like a container ship. This is the reason small companies tend to focus on new, innovative areas of the market. The big companies may not be able to make money out of these areas (yet) due to company cost structures and/or they can’t adapt quickly enough to seize these opportunities.

Another benefit of scale that we see often on the web is demand-side economies of scale, otherwise known as network effects. Anyone can start a social network, but few can compete with Facebook. Their competitive advantage is largely due to network effects – the more people on a social network, the more value it has, and the more people will be willing to join. These demand side economies of scale erect a barrier to entry, thus retaining and increasing profitability, because customers are unwilling to sign up to smaller networks. This demand side barrier has been so effective for Facebook that even the likes of Google have trouble countering it.

We could even apply this type of analysis to the search results. If some serps are “easy” to get, then you may experience profitability issues. If they are easy for you to get, they are easy for some new entrant to get, too. As Google raises the bar, and makes it more expensive to compete, the threat from new entrants and/or those with less funding diminishes. Those who have more to spend, and/or are bigger businesses will likely find the serps more profitable than in the past as they no longer suffer the structural problem of a low barrier to entry. If you have the funds, then Google making it harder to optimize actually works in your favour.

Switching Costs

Almost everything has a switching cost whereby it costs a customer to change services. The more entrenched a product or service, the higher the switching cost, and therefore the higher the barrier to competitors. Microsoft Office has hung around in the enterprise, despite being less than ideal, because the switching cost – involving staff training and industry document standards – is high.

Capital Requirements

If you want to run a search engine to rival Google, then the capital requirements are significant.
However, if the return is there, capital is typically available, especially if the capital can be turned back into cash if the business doesn’t work out.

For example, the bank might be happy to lend on a hotel as they can still convert their capital back into cash by selling the asset. If a business relies on a large advertising spend, however, then capital may be more difficult to come by as it can’t be converted back into cash if things go badly. Capital alone is not a significant barrier to entry.

Incumbency

Incumbency can counter low barriers to entry. It’s easy to start a search blog, but difficult to draw attention away from the incumbents in this space. The established sites have built up loyal audiences over time. To beat incumbents, you’ve usually got to do something remarkably superior, complementary, or be prepared for a long battle.

Application Of Five Forces Theory

Start by evaluating your position against the five main criteria and identify where forces are strong and where they are weak.

If the buyer is in a powerful position, and switching costs are low, then sending them to a landing page where your prices are high but your features are the same as the competition is unlikely to work. The buyer will likely click back and compare. In order for a conversion to take place in this scenario, the business would need to justify the higher prices by, say, focusing on the additional value offered.

If your prospective customers do face switching costs, then perhaps the copy could focus on how the business will help the customer absorb this cost. For example, a landing page could highlight trial offers and special deals if the buyer is switching from a competitors product.

Keep in mind that buyers are less price sensitive if your pricing represents a fraction of their total spend, but very price sensitive if you supply them with something that makes up a lot of their operating cost. If you offer an SEO service and you target small companies or individuals, then obviously the price structure needs to reflect this. Likewise, if you’re pitching to a company that spends millions on marketing a month, you’re more likely to focus on the value proposition as they are unlikely to care about a few thousand here and there as search marketing isn’t a large part of their operating cost.

Could your service make a major difference to your buyers costs? Can you lower the cost of their supply chain? If so, then the buyer will be less sensitive to price and more interested in value. If all your competitors are focusing their efforts at one step in the supply chain, could your advertising be directed a different step in the chain?

Drug companies now advertise their product to the end consumer when previously the advertising has been directed at the decision maker – their doctor. “Ask your doctor if (product) is right for you!”. Pressure is then put on the doctor to prescribe that brand over others because the patient is specifically requesting it.

Rivalry

Rivalry will likely be strongest when there isn’t one clear market leader, competitors are similar in size, and they make similar offers. It’s also likely to be strong if the industry is low growth as one competitor will likely try and grab another competitors share, whereas if the industry is growing quickly, this isn’t so much of a problem.

Try to ascertain the character of the rivalry. Is ego and empire building a major factor? Consider the flagship Apple stores. It’s possible these shops run at a loss in terms of their retail offering, but are valuable in terms of brand awareness and recognition. This can be difficult to determine, of course. Any industry where there is intense rivalry bound up with ego will face profitability issues, at least in the short term, as one competitor might be trying to run another out of business as they are engaged in a loss making war of attrition.

One of the easiest comparisons to make is price. Price wars often happen when there is low switching cost and sellers are offering generic product. Rental cars fall into this category. Any industry battling fiercely on price will have structural limits to profitability as margins are cut to the bone and passed onto customers in the form of low prices.

If a product is perishable, it will be vulnerable to price cutting. We often think of perishability in terms of food use-by dates, but many industries suffer perishability problems. Mobile phones can become obsolete, information can become outdated and hotel rooms can’t be sold once the clock ticks over to a new day. Products and services will be vulnerable on price if they are ending their useful life. Brand, image, service levels, and features are a lot less vulnerable to price as they aren’t perishable.

Dull established industries with high barriers to entry and high switching costs, such as big business software systems like SAP are likely to be profitable compared to most Silicon Valley internet startups where the dead body count is high. Are these two really in the same industry? It doesn’t help that we only tend to hear about the outliers, such as Instagram, that make the high-tech industry sound like a certified gold mine. The internet industry has significant structural problems affecting profitability, typically in terms of the level of competition, low barriers to entry and access to capital.

Also consider the role of complements. Complements are products used to help provide a service. For example, Adwords is a complement to a PPC marketing campaign. Without Google, a PPC campaign is significantly diminished in terms of reach. So, Google has considerable clout in this space as they have few competitors. There is supplier risk because Google may stop campaigns and/or suspend accounts.

Another way of looking at complements is the sum value is greater than the parts. For example, a smartphone is near useless without software, but with software, it transforms from being a phone to being a computer in your pocket. Complements may affect demand for your product or service. If you produce iphone apps, then your future is linked to that of Apple and their market penetration. Apple also owns the supply chain. Apple, therefore, can exert a lot of control and this has an impact of potential profitability for vendors. It’s best for mobile apps publishers, from a profitability point of view, when there are multiple providers of smartphones and market share is split between them. The likes of Apple would have less power to demand high fees from software vendors and would more likely incentivise production by passing on more profit to the application developer.

Shifts Over Time

This analysis is done at a fixed point in time, but as we all know, industry is fluid.

In the case of the online industry, significant changes can occur quickly. Take, for example, the rise of mobile computing. More tablets and mobile phones are being sold than laptops and desktop computers, therefore the entire paradigm is changing.

Makers of hardware are on notice. Anyone who depends on that hardware is on notice. Software vendors who don’t adapt to mobile computing risk competitors jumping into that market and eating their market share.

As far as search marketing goes, just what is the optimal marketing channel on mobile? Do people really sift through large lists of search results on their tiny screens? Perhaps other forms of pay-per-click will rise and SEO will diminish?

Buyer and supplier power can also change. At present, the power of internet content suppliers is rock bottom. Technology in general, and the search engines in particular, have played a part in devaluing content and shifting revenue to themselves. One consequence is that a lot of quality content is disappearing behind paywalls and into Amazon publishing. As Amazon makes it easier to publish and monetarize written content, and as more people take up tablets and mobile computing, then the utility of search engines may start to dwindle as content producers focus on other channels.

Being aware of the five forces helps us size up profitability and potential for opportunity. It is particularly valuable if the industry is on the verge of strategic change in one or more areas as this presents new opportunity to gain strategic advantage against incumbents.

Using Strategy Analysis For Positioning

Look for areas in an industry where forces are weakest and position accordingly.

In Competitive Strategy: Techniques for Analyzing Industries and Competitors by Micheal Porter, outlines a great example of positioning in the trucking industry.

Using the Five Forces analysis framework, he determined the trucking industry is characterized by operators who run large fleets. They have an incentive to drive down the price of trucks as trucks are a major part of their costs.

Most truck suppliers built near identical trucks to a set of industry standards, so pricing is fierce. This is a very capital intensive business. So how has one supplier managed to charge a 10% premium for their trucks and maintain 20% market share for decades?

Paccar, a truck manufacturer based in Washington, focus on one group of customers: owner-operators. Owner-operators buy their own trucks and contract directly with suppliers. Because these buyers aren’t buying fleets, they don’t have much leverage when it comes to price, and as it turns out, aren’t as price sensitive as we’d expect.

These buyers take a lot of pride in their trucks, so choose to spend money on customization. The trucks are made-to-order and include sleek exteriors, plush seating, noise insulation, high end stereo systems, and other enhancements. They’re aerodynamic, which reduces fuel consumption, they maintain re-sale value, they have a roadside assistance program, a high-tech spare parts system – all key considerations for lone owner-operators.

By focusing on one sector of the market where price forces are weakest (lone operators), Paccar have side-stepped a sector where price forces are strongest (fleet buyers). Their entire value chain is aligned with the owner-operator sector of the market.

Companies can influence competitive forces. They can address supplier power by making generic parts and inputs, thus making it easy for them to switch suppliers and thus negate the power of unique suppliers. To counter price cutting rivals, companies can offer more unique and valuable services. To limit new competitors, companies can heavily invest in R&D and sophisticated systems.

Industry Analysis Is Always Changing

I hope this article has given you food for thought. I find this type of analysis useful for search marketing indirectly. It gets me thinking – broadly – about where the untapped opportunities in an industry might lay, and where the competition is likely to be strong and difficult to counter.

This article makes a good point that industry analysis is getting even more challenging as industries fracture and fragment:

Among the paradoxes they observe is that market segments in many industries are fragmenting, even as global firms require increasingly large markets to drive growth and profitability. Combining those “profit pools” is like trying to combine the water in thousands of bathtubs — there are profits to be had, but how do you combine them so that they become material?

But as they also point out, the most important competition for many organizations today comes from firms who aren’t even technically competing in the same business. Netflix going into the production of its own proprietary TV programs? Best Buy doing sophisticated analysis for health care providers to see how well their cardiac treatment projects are going? Who would have predicted those shifts?”

Great opportunities are discovered using “out of the box” thinking :)

Further Reading & References:

In conducting research for this article, I have used three main sources: Competitive Strategy: Techniques for Analyzing Industries and Competitors, by Michael E Porter, Business and Competitive Analysis: Effective Application of New and Classic Methods, by Craig S Fleisher and Playing to Win: How Strategy Really Works by A.G. Lafley. Also, here’s a presentation that provides a good overview: