I don’t think Google or Yahoo! will be following Microsoft’s lead. Google doesn’t need to as a result of its dominance in the paid search advertising market. Yahoo! looks like it might be pulling out from search altogether and moving primarily to content / banner advertising.

Either way, it’s interesting to see some movement in terms of advertising dollars in search, but Microsoft’s move has yet to produce a sizable increase in actual search traffic. If the cash-back system ultimately produces a better ROI for advertisers despite the decrease in reach, we might see an interesting “supply-side” shift in search marketing.

If the increased ROI for Live Search advertisers results in a wider, deeper array of bargains and discounts for Live Search users, we might see a number of frugal searchers migrate from Google and Yahoo! to Live Search. Although marketers typically try to avoid bargain seekers, these users would not be bargain seekers in the classical sense; online “bargain seekers” are people who will rarely, if ever, pay for anything online that they can’t steal or substitute with something that’s lower quality but free. These users by contrast are able and willing to pay for goods consumed online but they simply want better deals.

Should the supply of good deals on Windows Live Search attract searchers away from Google it might create an interesting consumer niche for Microsoft, where in effect Live Search’s audience is smaller than Google’s but its audience is composed of the customers that advertisers value most - people who are looking to buy something right now. I don’t see this happening in the next fiscal year, but if the cash-back system is maintained and if it produces significantly better returns for advertisers then it could emerge as a wind shift in search.

But, even so, for an inexperienced single term African-American senator tagged with the most liberal voting record to defeat the heir apparent in his own party and then go on to hold off the much-vaunted Republican machine is a truly remarkable achievement. Much of it has to do with Obama’s instinct for marketing.

First, Obama’s personal charisma, his listening and public speaking skills, his consistently positive and unruffled demeanor and his compelling biography attracted the attention and empathy of voters.

Second, Obama converted this empathy into tangible support. More citizens volunteered time and money to help the Obama campaign than any previous presidential candidate. Indeed, he attracted more donors than the entire Democratic or Republican party nationwide. Almost half of Obama’s unprecedented $639 million in funds raised from individuals came from small donors giving $300 or less.

The list goes on, but you get the idea - politics, like business, comes down to a matter of marketing. Barrack didn’t market policies, like traditional politicians of the past, nor did he really market ideology. He marketed himself, and built around himself a remarkable cult of personality.

This truly was a remarkable election, from the point of view of a marketer. Please read the HBR article for the full scoop.

New York Times Op-Ed: An Economy You Can Bank On by Casey Mulligan, University of Chicago Economics Professor

• Morning Keynote: The State of Marketing in a Web 2.0 World
• Complete Website Strategy: SEO & Usability
• Customer Life-Cycle & Loyalty Marketing
• Email Marketing
• Social Media Strategies
• Big Brands, Big Plans Keynote Panel

Should any of you be in attendance (I know that there are a lot of Southern Californians who read this blog) feel free to chat with me - my nametag will identify me by my employer (SmartDraw.)

I don’t expect that any of the stuff that I’m going to hear will be mind-blowing or Earth-shattering, but I think I will be able to capture some working knowledge of how to implement social media campaigns and what the best practices are. I think the conference will allow me to contrast their experiences with mine (which have been interesting thus far) and perhaps it will even move me to try to implement some new stuff at work.

We’ll see - I also want to try to learn some stuff from the other attendees; I’ll probably end up attending the subsequent happy hour following the conference itself.

See you there (hopefully!)

There are a lot of things that annoy me about Web 2.0 - the lack of sound business models, the buzz-driven approach to investment, the return of pastel colors, but I don’t think anything bothers me more than the cutesy culture that pervades this entire quadrant of the IT sector.

Yahoo and Google started the trend of using cutesy names for multi-billion dollar corporations, a trend which has become so commonplace that it would almost seem out of place for a Web 2.0 company to name itself using words found in Merriam-Webster’s English Dictionary. Google also introduced funny Easter Eggs, like the results when you search for “How Goes Google Work?“

As a result of Google’s success, many shiny new Web 2.0 company has sought to recreate itself in Google’s image, sassiness and cuteness included. While I think cuteness is fine for all of the general service-to-consumer interactions between Web 2.0 services and their users, I think this cuteness comes back to bite those services in the ass when it comes to getting businesses to adopt Web 2.0 services as part of their outbound marketing platform.

Let me share you a quick anecdote:

Over at Working Smarter, the blog I manage for work, we use a number of screencasts that we host with Vimeo, a YouTube competitor. We went with Vimeo because its Adobe Flash player had less compatibility issues than our in-house one and YouTube’s. Well, today we experienced a brief service outage and we were presented with the following error message:

SUCKER

Vimeo drank your milkshake!

This is what greeted all of our customers and potential customers when they came to visit the homepage of our corporate blog; isn’t that wonderful? Even if the majority of our customers have seen There Will Be Blood I don’t think most of them are going to understand right off the bat that this is an error message. It’s bad enough that our customers can’t see our screencasts, but having to show them this silly error message makes me regret giving this Web 2.0 company a chance to begin with. Why? It makes us look just as cartoonish and cutesy as Vimeo, an image which rests in stark contrast to the one that we’ve been trying to build.

So after being the butt of a few jokes by our CIO for my decision to use a third-party service to resolve some of our compatibility issues, I’ve decided that the cost of having this stupid error message rear its head to our customers isn’t worth the benefits of using Vimeo. We’re planning on scaling up our video usage considerably and we drive thousands upon thousands of eyes to our videos each week, which was essentially free exposure for Vimeo. Sucks for those guys.

A bit of downtime I could tolerate - that’s expected from any service, even YouTube, but the fact that we have to broadcast a bunch of cutesy garbage that clashes with our image to our customers whenever something breaks is unacceptable. The bigger lesson I am trying to draw here is that the cutesy stuff might be something that end-consumers appreciate, but a lot of businesses who try to integrate social media platforms into their outreach marketing efforts don’t.

Business Idea: Develop a YouTube, Vimeo counterpart that specializes in hosting corporate videos specifically, like training videos and so forth. Screencast.com is probably the best example of a “closed garden” in this regard.

Look, folks, I’m in the same boat as many of you; all of my savings are tied up in Washington Mutual and my fledging retirement fund is invested mostly in the stock market (I chose an aggressive growth portfolio.) Do you think I’m not concerned? Of course I am - but I’m not shrieking like a moron and demanding more Government control of private business in order to prevent…. more Government control of private business?

Let’s distill some sense out of this hysteria.

The AIG and Bear Stearns Bailouts: Total Steals for the Federal Reserve Bank

Let’s talk about AIG first, since that is on the forefront of minds of Americans this morning. AIG is the world’s largest insurer and in exchange for 79.9% of their equity they received $85 billion in funding from the U.S. Federal Reserve Bank. Here are the point-by-point facts worth noting, taken from this morning’s Wall Street Journal:

• The $85b loan from the Fed to AIG has a two-year duration on it with an 8.5% interest rate - this means that the Fed assumes that there is a reasonable probability that AIG will bounce back within that timeframe.
• The fact remains that AIG is a fundamentally solvent company with $1 trillion in assets and $77.9 billion in surplus capital, but the problem is that a large amount of its cash are tied up in non-liquid assets which cannot be tapped for running the day-to-day operations of the company and that is why AIG is borrowing against those assets from the Fed and elsewhere.
• The loans made to AIG by the Fed and other lenders are secured by the aforementioned $1 trillion dollars in assets.
• AIG’s insurance business is still profitable.
• AIG is not going to be run by a government bureaucracy, which is what everyone seems to think. Since the Fed has taken over the vast majority of ownership in AIG they have since fired the incumbent CEO and replaced him with Edward Liddy, the former head insurer of the Allstate Corporation. This is about as far as the Fed is going to go in terms of getting directly involved with the management of the company - they fired the bozo who put AIG in this position in the first place and replaced him with an outsider who happens to be a successful insurer for another firm. Sounds just like what a private bank would do if they took over a business.

Overall, it looks like this might be a total steal for the Federal Reserve Bank. This time last year AIG direct traded at $70 a share; the Federal Reserve just acquired a 79.9% stake in the company for just around $3 a share. The Federal Reserve just purchased an 80% share of $1 trillion in assets for $85 billion - that my friends, is a steal.

The American tax payer is going to see a net benefit, not a loss, for this bail out. Look at how well the Chrysler bailout of the late 1970s turned out for the Fed: people said the exact same thing then that they’re saying about the AIG bailout, that it was a “return to feudalism.” How did it turn out? Well, read this segment from the New York Times for your answer:

You can draw a clear line from the Chrysler bailout to the recent attempts to steady Wall Street. Back then, Washington insisted on a few pounds of flesh, like a wage freeze for Chrysler workers, in exchange for aid. Mr. Paulson has done something similar by insisting that shareholders of the Wall Street firms benefit little from any bailout.

In 1979, the government structured the Chrysler deal so that taxpayers might earn a profit from it (which they did). This year, the Fed effectively purchased securities from Bear Stearns that it hopes to sell for a gain when the financial markets calm down. While it’s way too early to know if the strategy will succeed as well as it did three decades ago, it’s certainly conceivable.

The NYT goes on to insist that perhaps the Chrysler bailout may not have been that successful because it didn’t stop the U.S. Auto Industry from getting steam rolled by the Japanese beginning in the early 80s. I guess the argument that they’re trying to make would have been that if Chrysler collapsed then there would have been this magical alternative history where Ford and GM would have begun producing hybrids (I’m being sarcastic) beginning back in the early 1980s. Sorry, NYT, but I’ll stick with what actually happened (win-win for the Fed and Chrysler) versus a speculative theory that can’t be tested.

The point I’m trying to make this this: we will see a net profit from the Bear Stearns and AIG bailouts, just like how we did from the Chrysler bail out. The Fed drove a hard bargain and acquired over 1 trillion dollars worth of assets at rate of pennies on the dollar.

“Let them Fail” is a Great Idea, if you Don’t Need a Line of Credit over Next Five Years

HotAir ran an idiotic piece this morning which amounted to “we should just let every mismanaged financial institution fail.” While I’m glad that Lehman wasn’t bailed out (costs outweighed the benefits,) I’m also happy that Bank of America has been snatching up failing institutions for pennies on the dollar and that the Fed bailed out AIG and Bear Stearns. As I demonstrated in the first segment of this piece, the hysteria that has overcome the vast majority of the market has resulted in having a number of major institutions valued well below the reality. AIG has over $1 trillion in assets, liquid and nonliquid, but their market cap is hovering around $6.1 billion - AIG’s liability is large (hence the bailout,) but it’s certainly not greater than $1 trillion (good solvency, poor liquidity.)

When I hear presidential candidates on both sides of the aisle crying “oh no, not another bail out - we should have let them fail” it makes me think that they lack the vision to lead this country, let alone objectively analyze a complex financial market. So what would happen if AIG, Fannie Mae, Freddie Mac, and Bear Stearns all failed? Who knows, but I’ll tell you what hasn’t happened yet: credit hasn’t totally dried up. Sure, it’s contracted as a result of doubts cast over the entire lending industry, but it’s still available for people who need it and have demonstrated good credit practices in the past.

The fact that the government has stepped in and stopped some of these giants from falling helps nip some of this hysteria in the bud - we haven’t seen any more bank runs since the IndyMac disaster (thank you, Senator Schumer, for causing that.) So what would happen if we just let these major financial institutions fail? In some cases the result is just a gut-punch to the stock market, as we saw with Lehman, but when major mortgage houses start going under without any help from the Fed then we can see bank runs nationwide, and that would be a real crisis, like the kind we saw in the great depression.

The lesson here is that the Fed isn’t bailing out these companies for the sake of preserving these mismanaged organizations. They’re doing it to stop the development of a greater widespread panic which can result in healthy financial institutions being seriously harmed, and if that were to happen the entire credit industry would be set back for years upon years. We are a society that lives on credit - imagine a world where confidence in all credit institutions has been reduced to zero and no one wants to lend for anything; no credit cards, no car loans, no student loans, no nothing. Try to tell me that spending a few hundred billion now to prevent that catastrophe isn’t worth it.

This entire crisis on Wall Street is the result of the housing bubble; what the Fed is trying to do now is to slowly deflate the bubble, whereas the idiots who advocate the “let all of them fail” philosophy would rather have the bubble burst in one go over our heads. They get upset because they see the direct cost of the Fed’s bailouts written in the headlines of every major newspaper, so they assume that there must be no cost for the alternatives, right? As I’ve pointed out - that mentality is DEAD WRONG. Every choice presents costs, and the Fed has calculated that the cost of having these institutions fail is too great for our financial system to bear. The pundits who are against every bailout regardless of the situation are not thinking like economists, who weigh costs with risks - they’re thinking like politicians, who have the exact same cognitive outcome regardless of costs or risks.

How is Regulation Going to Solve the Problem? Isn’t the same Government Responsible who Handled Katrina so Well?

Back to the title of the article: regulation - how is it going to solve the problem? We already have regulatory oversight on public companies in order to prevent them from cooking the books, so do we need some sort of regulation for preventing companies from making bad decisions? Because that’s what caused this problem in the first place - a bunch of investors deviated from their long term objectives in pursuit of a bubble that couldn’t possible last and now they’re paying for it. Am I pleased that the mistakes of these investors are responsible for swiftly deflating the value of my fledgling retirement fund? Of course not, but do I think that having the U.S. Government step in and regulate all possible investment decisions is a good idea? Hell no.

First, let me address the fact that Fannie Mae and Freddie Mac were created by the U.S. Congress and encouraged to help lower income Americans purchase homes by offering sub-prime mortgages. Government is as much to blame for the current financial crisis as the lemming-like investors are on Wall Street.

Second, there seems to be this mentality among the majority of people that individuals should come running to the Government at the first sign of trouble; so a bunch of banks end up getting screwed because they did what they were encouraged to do by said Government - this is clearly a complete and total failure of the free market system therefore we must abolish it and have mother Government take care of everything for us. Sounds a bit drastic to me; this government can’t even keep a handful of levees up to code in a hurricane-ridden area, let alone manage the most efficient market on Earth better than it already is.

Third, these companies are not getting handouts - they’re getting high interest loans and are paying a hefty price for them in the form of equity. So when I read articles where authors whine about “how come the citizens aren’t getting handouts?” I want to answer “it’s because the average person couldn’t afford to repay a loan with 8.5% interest in two years without winning the lottery.”

The fact is that people want to point the finger at Wall Street and make it out to be some abnormal failure that merits a total overhaul of the entire system. Get a grip, people - the problem was caused by human error, a liability that, I assure you, can be found outside of free market economies. To say that we can prevent all human errors with the steady hand of Government is a ludicrous proposition, given that the Government is arguably more error prone than any free market organization. Putting the Wall Street into the hands of Government and calling for more regulation isn’t the answer - it’s an intellectually vacant copout.

So what’s the answer to the current financial crisis? The answer is to learn that the assumptions behind major investment decisions need to be challenged in order to avoid pitfalls like the sub-prime mortgage crisis - this entire quagmire resulted from a flawed assumption (that the average retail price of a home would remain above $250k) that was factored into a computer model. That assumption was never challenged and now we’re paying the price. Regulation is not a method to prevent bad decisions, it’s an excuse for politicians who are too timid to accept the blame for helping create the sub-prime mortgage monster.

The first, and arguably most outrageous, cardinal sin of marketing is to sacrifice long-term objectives in order to achieve higher than usual short-term profits.

A good example of this sin would be the recent mortgage meltdown in the financial sector; to quote the Harvard Business Review for a moment:

Arkadi Kuhlmann, ING Direct’s founder and CEO, is one of the most creative business leaders I’ve ever met. But he was able to distinguish between get-rich-quick industry fads and real innovation. “Every person who tries to do real innovation is going to be tempted by money, greed, acceptance, being in the middle of the action,” Kuhlmann says. “But at the core there is one fundamental difference: I know why I’m here. I want to make a difference. If I was into this just for making money, being a big accepted banker, I would have been tempted. But that’s not why I’m here. I am trying to build something that changes the business, that allows me to stay on the right side of the discussion.”

In HBR’s “Why the Mortgage Meltdown Hasn’t Burned These ‘Square’ Lenders” Mr. Taylor enumerates a list of lenders and major financial institutions who were not tempted with the promise of a quick buck, Mr. Kuhlmann of ING Direct being one example.

These “square” lenders are not getting burned by the current mortgage meltdown because they didn’t deviate from their core mission and stuck with their long-term objectives. Sure, these institutions may not have enjoyed the record profits of 2005-2007 like Bear Stearns and Lehman Brothers did, but foregoing those three years of great profits followed by the most infamous spree of financial bankruptcy since the savings and loans crisis seems like a good idea in hindsight, doesn’t it?

The Two Consequences of the First Cardinal Sin

There are two things that can happen to a business when it commits this first cardinal sin of marketing:

1. A company that commits this sin can permanently damage the trust between itself and its customers by deviating from its promises. This makes it increasingly more difficult to acquire new customers and retain old ones.
2. A company that commits this sin can find itself jumping with both feet into a market environment that it doesn’t completely understand. This can ultimately lead a company into a situation where costs begin to overrun expectations and in some instances, revenue.

The second of these two consequences has afflicted the financial sector first. Major financial institutions, like Lehman Brothers, jumped feet first into the sub-prime mortgage market and made a risky gamble based on a flimsy assumption: that the average retail value of homes in the United States would remain above $250,000. The assumption held up for three years and Lehman Brothers had great financial postings during that span of time, but as soon as the housing bubble burst and the average price of housing fell below the assumed level these institutions became insolvent.

As a result of this failure, these same financial institutions subsequently incurred the other consequence of this cardinal sin: the customers no longer trust the firm. Do you think that high-net worth individuals who had millions stashed away in financial instruments owned by the Lehman Brothers are going to reinvest back into that organization even if Lehman restructures following its bankruptcy filing? Hell no.

So let this be a lesson to all marketers out there, regardless of industry: never sacrifice your long-term objectives in favor of short-term profits. It’s not worth it.

Back on Earth we have to live with a sad reality: for every one hundred people who get pissed off by bad marketing there’s one schmuck who ends up rewarding bad marketers with his patronage, and that money reaped from that one schmuck is enough to make up for the other one hundred dissatisfied folks. And thus the bad marketer has no real incentive to stop being a bad marketer, so long as there’s always that one schmuck who makes it worth their while.

“Bad marketing” is a phrase that I usually use with “incompetent marketing,” but in this instance I mean marketers who just don’t give a damn about the repercussions of their work.

The extent to which a “bad marketer” is bad is debatable; in some instances they merely invade your privacy, and in others they knowingly deceive you and try to sell you on promises that they have no intention of fulfilling. Really bad marketers, the ones who sell products that end up killing or hurting their customers, end up on the ten o’clock news and lose their customers. What about the bad marketers in between?

What about the social network that captures your email address and resells it over and over again without your permission? What about the SMS info service that violates the national Do Not Call list and spams you with messages? What about the local business that hires door-to-door solicitors who try to interrupt your daily life to get you to sign up for some crappy service? What about niche news sites who plagiarize content from unknown authors? How do customers fight them?

How Have You Fought Them?

Please post your answers here on how you’ve tried to fight bad marketers - it can be anything from writing a letter to the editor of your local newspaper to just referring all of your friends to someone else. I look forward to reading your answers.

I had a run-in with a bad marketer during my short lunch break today. I’m a big fan of supporting local businesses - they add character to the neighborhood where I work and I simply wouldn’t enjoy working there were it not for these businesses. So today I decided to extend my patronage to a local deli owned and operated by a single family.

My lunch break is the only time I get to spend outside in the wonderful Southern California weather on any given day, so I usually grab an outside table and bring a good piece of reading material with me. I ordered my food and began reading my book at my table outside; after a few minutes of reading someone starts speaking to me.

Bad Marketer: Excuse me, sir!

Aaron: (looks up above the fold of his book, not putting the book down)

Bad Marketer: I’m here to tell you about the local Chiropractic Practice which is offering a free back massage if you live or work in the area. Do you live or work in the area?

Aaron: No. (Resumes reading)

Bad Marketer: (Turning to the person sitting at the table next to mine) Excuse me, sir! I’m….

Yes, I lied to the guy. When dealing with bad marketers I always take the path of least resistance when it comes to getting them to shut up and leave me alone.

I proceeded to watch this guy pester everyone else who was sitting outside. He even went inside and started badgering the people inside the deli, including families with small children, and then he repeated the exercise with a small Mexican restaurant a few doors down. Most offensive of all, however, was when he approached an elderly couple who were just trying to get out of their car; he effectively cornered them between the parking lot’s fence and the other cars.

Maybe I’m overreacting here, but this really pissed me off - not because of what he was trying to sell, but because of these two things:

1. I didn’t appreciate the interruption and I’m sure no one else did either.
2. I felt like I was put on the spot against my will and basically cornered by the marketer; it really felt like an invasion of my physical space and my privacy. That, to me, is unacceptable.

I see people get more upset over spam emails than they do about this kind of marketing; spam emails are annoying, but they don’t invade your privacy or violate your physical space in the way that a solicitor does. I’m having one of my "am I wired differently than everyone else?" sort of moments; do most people assume that this kind of in-your-face marketing is so common that they don’t even react to it? And somehow spam email is less common and thereby more worthy of a negative reaction?

Preface: This is a post about marketing, not about politics. Should you be inclined to submit comments, please bear this in mind. Political comments aren’t going to get published.

What do Dell, Microsoft, and Governor Palin all have in common? They let their competition succeed at defining them. This is a major marketing problem; short of major PR disasters, like the Jack in the Box E. coli outbreak in the early 1990s, I can’t think of many kinds of marketing/PR problems that are worse than this kind.

First, I think the McCain campaign could have avoided all of this by putting Governor Palin on the entire press circuit and all the talk shows immediately following the Vice Presidential announcement on Friday. Governor Palin was, and to a large extent still is, an unknown quantity to a lot of Americans; this means both significant opportunities and risks for the McCain campaign. Had the McCain campaign gotten Palin to define herself first on all of the talk shows and the traditional press circuit then they could have probably nipped a large amount of the media speculation firmly in the bud. But that’s not what happened.

Instead, the campaign did little to get Palin’s story out through the mainstream media the way they wanted to tell it. So McCain’s opposition stepped up to the plate instead. They labeled Governor Palin as a country yokel; a delicate, fragile woman incapable of standing up to tough questions and scrutiny; a careless mother; and someone who was devoid of any sort of achievement or record. These are the labels that hung in the air prior to Governor Palin’s speech on Wednesday night. It doesn’t matter of they were fair or unfair. So what did she do?

Simply, she capitalized on those low expectations set by the opposition and used the spotlight of the Republican National Convention to surpass them by an order of magnitude that was not to be believed had you taken everything written about her as the gospel truth. That’s all she had to do: demonstrate in a public and prominent fashion that the expectations set by competitors were well below reality.  To quote the National Review Online for a moment:

I would like to thank the US media for doing such a grand job this last week of lowering expectations by portraying Governor Palin - whoops, I mean Hick-Burg Mayor Palin - as a hillbilly know-nothing permapregnant ditz, half of whose 27 kids are the spawn of a stump-toothed uncle who hasn’t worked since he was an extra in Deliverance.

How’s that narrative holding up, geniuses? Almost as good as your “devoted husband John Edwards” routine?

Palin’s nomination acceptance speech last night was a fantastic start for the McCain campaign’s public relations battle in defense of their Vice Presidential selection, but it’s only a start. I expect we’ll see a lot more of Palin on the campaign trail and on the press circuit.

The Parallel to Microsoft and Dell

I see a lot of parallels with this story and the story of Microsoft, Dell, and Apple. A quick passage from Fast Company should serve as a good introduction:

“Nobody messes with anyone in the tech industry the way Apple has messed with Microsoft,” says Enderle. “It’s the first time I’ve ever seen a major national campaign that disparages a competitor, and the competitor just sits back and takes it. If somebody tried to do that to Oracle, you wouldn’t be able to find the body.”

Dell is just as affected by Apple’s marketing as Microsoft is; Microsoft provides the “lame, crappy” operating system and Dell provides the “lame, unreliable, broken hardware.” Apple has, with the help of Microsoft’s own missteps during the initial release of Windows Vista, lowered the consumer expectations for Microsoft products below the level of reality.

Don’t believe me? Watch even one video from Microsoft’s Mojave Experiment - the entire point of that campaign is that the perceptions of Vista fall well below reality and the campaign does a very effective job in challenging and even changing those perceptions.

As the poster in “Eight Years of Wrongness” points out, all of these companies have simply taken attack after attack after attack without offering a substantive rebuttal. The Mojave Experiment is a great start, but that’s all it is: a start. Dell, Microsoft, and other PC vendors should follow Lenovo’s lead and start developing much more direct counter-advertising, like this ad:

So what do I recommend that Dell and Microsoft do? Simply this - take every opportunity to seize the spotlight and directly rebut the expectations set by Apple. Apple’s products are far from perfect and Dell/Microsoft’s aren’t the complete and utter disaster that they’re portrayed to be. Don’t try to set any new expectations or new messages - challenge and correct the dominant ones set by the competition first.

TechCrunch basically made the point yesterday: TwittAds is a bad idea. I wanted to add my two cents from a the perspective of someone who spends a lot of time asking himself “would my company want to buy ads on this site?”

The point of TwittAds is thus: put advertising on your personal Twitter page and hope that your followers click on your Twitter ID, view the ads on your Twitter page, and hopefully execute some monetizable action (like clicking on the ad.) This advertising model indicates a fundamental misunderstanding of advertising from a buyer’s point-of-view.

Seth Godin says thus about advertising in his influential book, Permission Marketing:

From an advertiser’s point of view, the single most important tactic is frequency. Frequency is a simple concept: How many times is your ad presented to a single individual? In practice, though, frequency can create a number of pitfalls.

When advertising agencies measure their campaigns, they look at reach and frequency. Reach is a fairly simple metric. How many different people were exposed to the ad? Frequency, as we’ll see in a moment, involves some more artful measurements.

Seth’s wisdom is still relevant ten years later. Twitter is weak on reach to begin with; the Twitterers with the most followers, like Mr. Scoble, have around 34,000 followers. Assuming that the TwittAd advertisers are trying to target the followers of influential Twitterers running an ad on a single Twitter page, even for someone like Scoble, has insufficient reach to even merit the attention of modest advertisers. The obvious solution to that problem is to place the same ad across a number of Twitter home pages, which I will dissect in a moment.

On the surface Twitter appears to be a perfect mechanism for frequency, at least until you look under the hood. Let’s look at a sales funnel I cooked up:

So where did I get these figures? I made a reasonable estimate based on contextual advertising performance for the final Twitter home page to Advertising Landing Page CTR rate, and the first two rates are determined by my own personal experience with Twitter (I actually read about 1 in every 100 Tweets that I am subscribed to.) I’m not trying to perform exact science here, I’m trying to make a point about how pitifully small a reach of 34,000 is.

So here’s a formula for how we determine the CTR for a particular Twitterer:

Advertising Clicks per Day = Audience * (Number of Tweets Per Day * Average Number of Tweets Actually Noticed by Followers) * CTR from Noticed Tweets to Twitterer’s Home Page * CTR from Twitterer’s Home Page to Advertisment

Let’s plug in some values for Robert Scoble, who is the best-case advertiser that for TwittAd:

Audience	33,482
Avg # of Tweets Per Day	100
Tweets Noticed by Followers	0.01
CTR Tweets to HP	~0.01
CTR HP to Ad	0.01

If you do the math using the numbers that I’ve supplied you learn the Robert Scoble would generate between 3-4 clicks on an advertisement per day. Pitiful.

As Erick Shoenfeld pointed out in the original TechCrunch, the home pages of specific Twitterers are simply not a popular destinations for Twitter users. What Erick didn’t mention is the huge noise problem with Twitter - even if Scoble sent out 100 tweets a day no one reads all of them; in fact, most of them are not read at a level beyond mere skimming.

The other problem with advertising on Twitter is the lack of context of the advertisements - how in the hell do you make sure that the right Twitterers with the right messages become advertisers for the right products? It seems like an impossible challenge to me. Anyone who wants to advertise on Twitter pages is going to have to advertise on more than one, period, and how you do that with any level of appropriate audience discrimination seems infeasible. I guess the philosophy of TwittAd is to take a handful of ads and broadcast it to one amorphous, untargeted audience and hope that the combination of “frequency and reach” can yield enough sales for advertisers to overcome the huge waste of marketing dollars spent on the uninterested portions of the audience.

This is just Web 1.0 advertising with Web 2.0 spoilers - indiscriminate broadcast advertising is ineffective and smart advertisers avoid it. This is the principal reason why the original Web 1.0 bubble crashed - the failure of the indiscriminate broadcast advertising model. Once again Web 2.0 entrepreneurs disappoint me by failing to learn the lessons taught in the first crash.

Valleywag goes on to declare that since the mighty Robert Scoble was unable to save the embattled commodity hardware producer from a stock price drop, it must be because influencer marketing does not work; pardon me while I roll my eyes in feign disgust at the predictable lack of intellectualism over at Valleywag. They go on to cite a study which tells us the obvious: people believe in the word-of-mouth power of their friends over the WOM power of a blogger by several orders of magnitude.

Influencer marketing is not dead, folks; it’s alive and well. Let me shed some light on this:

The Seagate example is stupid

What do Robert Scoble and Seagate have in common? What’s Robert’s message? What’s Seagate’s message? The first person that can answer all of these questions wins a slot in the Marketing Ninja hall of fame, because I sure as hell can’t.

Here’s the big problem with this Seagate example: the vast majority of Seagate’s consumers are completely unaware that they’re even using a Seagate product, and even if they did they wouldn’t care.

So how is sponsoring a prominent techblogger, especially Scoble, going to help make Seagate’s case to customers? The problem is mostly Seagate, some Scoble. Seagate’s in a commodity business and it has an exceptionally challenging task of differentiating itself from every other hard drive manufacturer. In addition Seagate should be trying to market itself to PC manufacturers, not end-consumers and tinkerers like the sort who would read Scobelizer.

Generally speaking I think blind sponsorship of anything is laughably stupid - what’s the point of having people see your logo and other branded materials if there isn’t a readily identifiable point to it?

Influencers are effective only on common ground

Influencers, whether they are prominent bloggers, noted industry experts, or journalists, are effective for the purposes of marketing only when they find common ground with your company and their audience. I can’t disclose the details (my employer is a stickler about privacy) but we’ve been working very closely with an influencer who has a common message with us: make better presentations using good visuals. Our software can be used to sculpt effective visuals and our influencer sells many books and courses on the art of giving good presentations with good visuals.

We have a good working relationship; he has been selling more books and we have been selling more software as a result of this influencer-sponsor relationship. Why is ours working so well but Seagate’s failed? Because we have a common message between us and each other’s audiences that is visible to the naked eye.

It takes a potential customer around two lines of marketing copy to see the connection, and it sells. What our influencer does is lend credibility to our message about using our software to prepare visuals, and in turn we offer our influencer a tool to help his audience implement his own advice.

The ripple effect

The study that Valleywag cited is correct: people trust the word of mouth of their friends over bloggers by orders of magnitude; however, if a blogger has an audience of several thousand and converts even a small percentage of that audience to become evangelists for the sponsor there’s a potential to create a penetrating effect within the converted audience’s sphere of contacts. It’s the ripple effect - positive or negative referrals from just one person can precipitate a sizeable number of residual sales.

As we have learned time and time again, just because the sales immediately following a sponsorship activity are do not yield net profit does not mean that the residuals won’t. In some instances the volume of residuals can be much higher than the initial sales themselves.

So the lesson here is thus: influencer marketing works, but you need to have a single, common message that is clear to the intended audience. It may not always work, but influencer marketing is by no means dead.

Ultimately bad reviews and stories from these sites force companies to stay honest by hitting them in the pocket book, and that’s one of the beautiful things about the Internet: the complaints of a few “average Joes” can be leveraged successfully against powerful companies.

But what happens when an army of misinformed consumers use these sites as echo chambers for false claims about small businesses? What happens when a small business is caught in a self-feeding storm of inaccurate, yet damaging buzz with no opportunities to defend itself?

This hit close to home for me recently - we had a negative review pop up on Amazon, one that also happened to be grossly inaccurate and speculative. The details of the review wouldn’t make such sense here unless you’re familiar with our product, but the spirit of the article was something along the lines of someone who didn’t understand why this product didn’t work like an entirely different product aimed at a different market.

Imagine if someone bought a rider lawn mower and complained about how it was a pain in the ass to push - that’s the level of inaccuracy that went into the review about our product.

Of course, being that most of the people who came to check out our product on Amazon have never actually used the product they have no inhibitions about voting up the review, and that has quickly made the review the most popular. I also suspect that there’s some psychology at work here - I think a lot of people want to be talked out of spending money on a product, even if it’s good, and are relieved as soon as they see a negative review which gives them a legitimate excuse for not purchasing.

We’re not the only ones who’ve had this problem - Dino Esposito, a prominent .NET author, has had issues with trolls writing zero-substance digs at his books since 2004.

I wonder how many sales have been lost to totally inaccurate reviews; probably a lot. Amazon began using the Real Names engine a while back in order to eliminate trolling, and that’s a good start, but it still doesn’t do anything to enable companies to fight back against inaccurate reviews written by real people.

Why should a company lose tons of potential sales because a customer couldn’t figure out that you’re supposed to sit on top of a rider lawn mower and drive it per my absurd example? Giving customers a voice is a great but when that voice starts shrieking inaccurate information, aren’t companies entitled to clear their names?

I say “yes.”

Back when I was just getting started blogging I made a mistake that I think many new bloggers make - I started blogging about blogging because I wanted to share my excitement, my new experiences with my developing audience.

Most new bloggers who get sucked into that morass quickly veer into another vapid tangent, namely the area of corporate blogging.

“OMG, this is so easy and effective - I can’t understand why every small businesses doesn’t start doing this right away!!”

I did it - I wrote about why corporations should have blogs without any first-hand experience as a corporate blogger. Thankfully, I’m not the first blogger to drink the Kool Aid and make that mistake.

Fast-forward to August of 2008

I’ve been working as a corporate blogger for a small software company since May. I have certain performance goals that have to be met each month (subscribers, sales) and my performance has been solid. However, this job has not been easy - not nearly as easy as many overly-enthusiastic newbie bloggers make it out to be.

What I’ve come to realize is everything that I ever thought about what it’d be like to blog for a business is wrong, and today I’d like to share some of the insights I’ve learned over the start of my career as a corporate blogger.

There are a number of myths perpetuated about corporate blogging that need to stabbed in the heart with a wooden stake, so let me begin:

Myth #1 - In the eyes of readers corporate blogs are just personal blogs authored by a corporation

Personal blogs are very straightforward - an individual or a group of individuals author posts around a central set of ideas with the objective of getting as many people to read the posts as possible.

Corporate blogs are a different animal. Personal blogs have a significant advantage - they’re authored by humans. Readers trust humans, not faceless, monolithic organizations like corporations.

Therein lies a whole set of challenges that rarely occur in the sphere of personal blogging - corporations have to continuously demonstrate their humanity just to catch up to that basic level of reader-author trust that personal bloggers take for granted.

Humanizing an organization, no matter how small, is a delicate operation which requires a lot of forethought and gruesome trial and error.

In addition, corporate bloggers have the additional problem of anti-corporatism innate to social media - people are more hesitant to subscribe to, link to, comment on, and vote on corporate blogs. That’s a fact. Unless a company is part of the “cult of free,” its corporate blog is going to have a much harder time finding the same kind of success as personal blogs.

Myth #2 - Corporate blogs are just like TechCrunch, ZDNet, CNet, TechRepublic, Etc…

The biggest misconception about corporate blogs is equating them to major news and commentary blogs like TechCrunch. Here’s the difference: even if TechCrunch and ZD Net are incorporated, those blogs are the business, not marketing mechanisms for the business.

They have the advantage of not having to use the content of their blogs to sell stuff - they have advertising to take care of that for them. The bloggers at all of those big publications rarely have to put themselves in the crosshairs at the risk of being called “corporate shills.”

Corporate bloggers run a much larger risk - they can’t distance themselves from their own monetization activities like how advertising-supported blogs can. Instead they have to put themselves into the fray and use their content to lead potential customers towards their own products while still retaining the trust and confidence of their audience. This is hard.

Myth #3 - Producing a blog post for a business takes about as much time as a personal blog entry

It doesn’t take that long to write a personal blog entry, and heck, a business blog isn’t really all that different - it seems pretty reasonable to assume that it’d take about the same amount of time to produce a blog entry for a corporate blog, right?

NOTHING could be further from the truth. Blog entries for corporations are time-consuming and expensive, because a corporate blog has to be 100% consistent with all of the company’s other marketing messages and because the corporate blog has to be treated as though every customer will read it.

In addition, there are some very tough objectives that have to be accomplished by corporate blogs - you want to use your content to lead people to eventually buy your product, but you just can’t shill it at non-customers mercilessly. Each piece of content requires careful planning and coordination at a level beyond anything I have ever done for Marketing Ninja, and it’s hard to describe just how difficult and time-consuming that coordination and planning really is.

When you write a personal blog entry you can do pretty much whatever the hell you want without significant ramifications, so long as you don’t do something absurd. When many of your readers happen to be paying customers the entire situation changes - they’ve given you money and now you owe them something of value - you can’t get away with writing any thing that comes off the top of your head, your readers often won’t let you.

Myth #4 - Traditional marketing tactics for personal blogs work just as well for corporate blogs

Ugh. I wish. Read point #1 again for background on this area. Here’s what doesn’t work for corporate blogs:

• Signing up on a social media account and submitting your own stuff  - doesn’t necessarily work well for personal blogs, but it’s not even an option for corporate blogs.
• The “Beg and Thank” StumbleUpon model - Most social media experts advocate a system that amounts to asking people to give votes to your article and then thanking them afterwards in order to retain them. If I think this is a bad practice for personal blogs (I do) then I also think that this behavior has the potential to be a PR disaster for corporate blogs.
• Commenting on Other Blogs - I’ve made it work for my corporate blog, but only because I have a methodical way of determining what blogs to comment on - I read a blog for a full calendar month before I even consider commenting on it. I don’t think most other corporate bloggers are nearly as diligent or proactive.
• Blog Carnivals - IMHO, blog carnivals don’t jive well with the required clean-cut, professional tonality of most corporate blogs. I’m sure there are exceptions, but that’s just my take.
• Classic Linkbait - List posts, link posts, gimmicks, and other types of classic linkbait are actually counter-productive for corporate blogs. Professionalism and engaging the right kinds of visitors are the two most important aspects of running a corporate blog, not blanket broadcasts. Some companies can actually pull off some pretty ingenious linkbaiting - Blizzard’s April Fools’ gimmicks are a fantastic example, but bear in mind their audience. What works for video game manufacturers doesn’t work for people who make CRM software.

Myth #5 - Getting paid to be a corporate blogger is just like getting paid to do your hobby

The biggest misconception of all - once you get paid to do your “hobby” then it is no longer your hobby. It becomes your profession. When you spend most of your time formulating blog posts, integrating other marketing activities into your blogging, coming up with content ideas, getting the IT team to make changes to the blog engine, and so forth then some of the original “fun” of blogging dies on the vine.

I enjoy my job immensely, but for different reasons than I enjoy personal blogging. I enjoy my job because I get to educate potential and current customers on the best practices for using our products and I see sales generated as a result; I enjoy personal blogging because it’s an opportunity for me to share my experiences and learn from them.

The satisfaction from professional blogging and personal blogging are two entirely different things and I am sure that there are some people who cannot make the adjustment from blogging as a hobby to blogging as a professional. Bear that in mind if you’re ever faced with the decision of doing this stuff full-time.

To Conclude

There are likely a ton of other myths that I’m forgetting to include on here, but I’ve spent enough time ranting about how big the difference is between “perceived corporate blogging” and “actual corporate blogging.” The point is that there are a lot of things that personal bloggers take for granted which corporate bloggers have to claw and fight for. So to all of you people who remain blogging hobbyists and personal bloggers - count your blessings and stop taking some of those nice bonuses for granted.

The answer: companies who leverage the member-to-member aspect of social networks outperform companies who try to use social networking technology in a website-to-member fashion.

A more succinct way of putting this is “content dumping onto social networks doesn’t work; enabling your customers to interact with each other through a branded web service does.”

This is what I said in my original post about monetizing Facebook applications: apps that make it are ones that add new dimensions to the interpersonal experience of Facebook.

Jeremiah’s post points out some companies who get web 2.0 and some who don’t, and I thought his examples were actually pretty good case studies in themselves. I actually liked his post so much that I might throw down some cash to buy his company’s report on the subject.

If any of you have some examples of good or terrible marketing on social networks then please leave them in the comments; I’d really like to take a look at some more of the bad ones, although we could all learn a lot more from one or two good ones.

If you want to use your own company as an example, you have my blessing: please promote yourself.

But honestly, AdSense has been pissing me off lately. I don’t give a damn what ads people click on when they’re on my site, but I hate it when I see crap like “Adventure Quest, FREE RPG” being advertised on the banner of my site. In fact, I hate it when any of the following things make it onto the banners on Marketing Ninja:

• Dating Sites
• Obvious Scams
• MPE or Male Enhancement
• System Registry Cleaner (hope you like spyware!)
• Stupid Online Games

I dislike all of those things because I don’t feel that those ads represent the interests of my audience nor do they represent my blog.

So what have I done to take care of those sites?

The only I thing I can do, which is to say that I’ve dumped URLs of offending websites into my “competitive sites” filter for AdSense. If there are any Google Accounts executives reading this, please note that I obviously am not competing with FilipinoDating.com nor any of the other sites that share FilipinoDating’s high honors in the Marketing-Ninja competitive filter.

So I ask AdSense, why not give us a “topical filter” to weed out advertisements that bear little relevance to the interests of people who come to this site?

Right now I can filter site-targeted advertisements (there are none here,) but I can’t do much about the untargeted ads. I would love something that would let me  specify a preference as to what kind of content can be displayed in any advertisements on my site.

Think of it this way - a topical filter would increase the utility of the advertiser’s AdSense impressions; if site owners could say “hey, my site is about XYZ” it could fill in a lot of the intelligence that the AdSense contextual engine apparently lacks. 

Update: In the middle of writing this article Marketing Ninja’s banner AdSense unit displayed an advertisement that said something along the lines of “Do It Donkey Style.” Seriously, Google, please give me something that can cut this crap off of my site or I’m going to ditch the AdSense altogether.

TechCrunch reported that GoDaddy is having a tough time keeping up with the demand for these domain names and is actually canceling a large volume of the orders.

The comments on the TechCrunch thread are pretty hilarious, most of them are from spammers looking to buy up trademarked domain names in hopes of getting a premium from corporate slowpokes in the future. Given how much I dislike the industry of domain parking I couldn’t resist sharing my schadenfreude in the TechCrunch comments:

I have to admit, I am really, really enjoying listening to the domain parking crowd squeal like stuck pigs over this one. Those guys make it a pain in the ass for startups to get decent branded domains without having to come up with goofy names. If GoDaddy decided to run a train on anyone, I’m glad it was those low-lifes.

And I think that comment accidentally made me the center of attention. Whoops. So I’m going to go ahead and clarify myself here:

Domain Name Parking is a Useless Industry

Capitalism is great; I love it. The idea is to exchange valuable goods and services in exchange for currency. What value does the domain name parking industry offer? Nothing.

Here’s the business model behind domain name parking:

• Be the fastest person to go to GoDaddy.com;
• Buy up potentially popular domain names, including registered trademarks and brand names;
• Mark up the price;
• Hold them indefinitely, adding zero value to them other than giant AdSense units and “male enhancement” advertisements; and
• Hope that someone has a branding need for a given domain name which is so urgent that they’re willing to pay you for the rights to the domain name.

Basically all the domain name parking industry does is make things more inconvenient and expensive for people who actually want to produce valuable web services. Domain parkers aren’t paid because they add value, they’re paid off to stop preventing other people from creating value!

Domain Parkers Are Counter-Productive

So why do I dislike them? Because they are the enemy of efficiency - they make it take more effort to buy domains and they make it more difficult for entrepreneurs to create web services with names that are easy to brand and remember. The biggest reason for having a good domain name is to make it easier for users to remember!

If anything makes me dislike domain parkers, it’s not because of my work as a marketer, it’s because of the basic economics concept of utility, and domain name parkers don’t have any utility! These guys are low lifes - they don’t do anything to add value to anything; all they do is take possession of intellectual property and become an annoyance for anyone who actually wants to use that property until someone decides that it’s finally worth it to pay them off.

Should Anything Be Done to Stop Domain Name Parking?

If domain names didn’t cost $10/year and nothing to maintain then we wouldn’t have this problem. A higher cost per domain would keep a lot of these parasites out, but it’d also make it much harder for people who want to add value to buy up good domains too.

What about making the domain name purchaser demonstrate that he or she is going to utilize it before agreeing to sell them a domain name, like how patents and copyrights work? That won’t work either because it’s a giant pain the ass - ask anyone who’s filed a patent.

Really, there’s no feasible way to keep domain name parkers from being pests and the best way to get around them is to come up with unique domain name ideas, like many of the Web 2.0 service names. In addition the costs domain name parkers present to fully-funded startups and profitable companies isn’t that high - the people who get screwed are private individuals and bootstrapped startups.

So is there anything that should be done to stop domain name parking? As much as I’d like to see an end to the practice, there isn’t anything that can or should be done. But hey, at least we can enjoy watching the fur fly over at TechCrunch.

I know that my employer has seen a sharp rise in its AdWords expenses in the past two years, partly because the online advertising laggards took until 2006 to discover paid search and have started bidding one keywords sense and partly because of a phenomenon called “Google Profit Optimization.”

What’s Google Profit Optimization, you ask? Simple. It’s a few automated actions that Google takes to ensure higher profits for Google at the expense of the customer: keyword obfuscation, optimizing placement for high CTR but low performance keywords (Google basically ignores its own Analytics Goals data,) and so forth.

GPO is a phenomenon that only started after Google went public and gained and insurmountable lead in the paid search advertising market, and I think this is a direct result of lack of competition in said market. So back to Google’s talking points for today’s antitrust hearings: Microsoft will be the only one who won’t like our deal? Well, here’s one customer who’s not happy with the deal; keeping Yahoo! out of GOOG hands is the best way to keep Google honest.

If someone, whether it’s Microsoft or not, can finally take the reins away from Jerry Yang and run Yahoo!’s search business with a hint of competence, we might see Google roll back some of its advertiser-gouging policies. The only way paid search advertisers, the people who pay for your free lunch whenever you do a Google search, are going to start getting treated with some more respect is if Yahoo! and Live Search stop losing market share, or if they offer better ROI.

Update: Search Ignite Says the Google Will Raise Yahoo! Search Advertising Rates by 22%. Don’t be evil, indeed.

As it turns out, the costs of the 3G iPhone are actually higher than the service plan & hardware of the original iPhone. I personally was planning on buying one (despite how much I hate the Apple fan boy culture) until I read article after article about the pricing discrepancies. I know there were plenty of other people who felt the same way I did.

Watching the 3G iPhone buzz erode from early June when some of the deceptive pricing bubbled to the surface of the blogosphere to disastrous iPhone App Store debacle was like witnessing a train wreck in slow motion.

Apple’s marketing campaign had all of the potential to be just as big of a blockbuster as the original  iPhone launch; look at what we consumers were promised:

• Support for high speed cell networks (3G)
• Support for enterprise business applications (Exchange)
• GPS
• And an application store.

But yet the 3G campaign ended up being a horrible comedy of errors when launch day arrived. What the hell happened?

• Pricing disaster - Protip for AT&T and Apple: if it’s easier for me to calculate all of my living expenses for two years than it is for me to figure out how much your phone + service will cost me over the same period of time, you’re doing it wrong. The data plan doesn’t cover text messages, the syncing features cost extra, existing iPhone customers can’t figure out if they’re going to have to pay the full price or $199, and the beat goes on. It’s easy to figure out who