CONSUMER STRATEGIES REPORT August 12 2003

al berrios & co. CONSUMER STRATEGIES REPORT 08.12.03: The New Search Engine Marketing

QUOTATION OF THE WEEK
***********************************
"Searching isn't a Web sideline -- it's the Web's strategic heart." Mylene Mangalindan, Nick Wingfield and Robert A. Guth, "Rising Clout of Google Prompts Rush by Internet Rivals to Adapt", Wall Street Journal, July 16, 2003

It has become pretty clear that I cannot maintain the editorial schedule I've set for myself. Every Tuesday, I find myself modifying something, pushing something else back, re-arranging. For this, I apologize, however, I'm not going to stop doing it, because as I've learned during the last 2 years I've been writing this Report, it's a matter of trail and error. Kindly bare with me, folks, as I get the hang of this scheduling thing, too.

Don't forget, this Thursday, August 14, 2003, from 5:45pm until 7:45pm, I will be moderating our final academic panel of the summer on Entrepreneurship & Advanced Negotiations at Baruch College's Zicklin School of Business (where I am an adjunct professor). Speakers include a venture capitalist, a consultant who's previously sold his tech company, a corporate attorney, and a financial manager. As usual, RSVP by replying to this email. There is no cost to attend if you've received this email.

[2] TRADE EVENT REPORT
***********************************
HRO World 2003, + + +
By Al Berrios

For the first time ever, this show claims to bring together human resource outsourcers, the guys who want to manage your HR needs cheaper than you can. Why would you need an HR outsourcer? Well, if you have hundreds, thousands, or tens of thousands of employees, you most likely have a staff of dozens (or hundreds) managing things like benefits, incentives, internal communications, training, etc. The New York Hilton is always a nice place, and the HRO folks made sure that the same problems the ARF had at their show in April, (ARF Annual Convention and Research Infoplex 2003), weren't going to happen at their show.

Although I didn't attend any of the information sessions, I did speak in depth to exhibitors, mainly vendors of services and products to make your workforce more productive. In an argument I presented in February and March, where I interviewed employees, managers, and CEOs, and analyzed different retail models, I came to the conclusion that the most productive and cost efficient work environment was one that wasn't commission-based and employees generally liked who they worked with, felt they had good, transparent communications with upper management, and didn't depend on benefits, bonuses, or other incentives to motivate them ("Love Your Customers? Then Love Your Service Reps").

This conclusion was the antithesis of this conference, and what I learned from my discussions with HR vendors is that because employers aren't in the motivation business, and don't have the time nor expertise to do it any other way, they spend around $100 billion per year on incentives, benefits, bonuses, awards, promotions, and other measurable motivational tools to get their employees, front-line and senior executives, on the same page as the overall corporate strategy. (How would you standardize and measure the effectiveness of compatible employees? Psychologists in the HR department?)

I also had the privilege of attending the worst "cocktail networking mingle" I've ever attended. I felt like… oink! oink! Get the picture? But I left with a greater appreciation for the incentives industry. I still don't see the point of depending solely on incentives in the HR department and I also didn't see the point of incentives in marketing and research, as I argued in April, ("The Incentive Show 2003"). Economists believe in incentives. But that's based on rational behavior. Using irrational behavior arguments and models, al berrios & co. has and can identify patterns in your consumers' and employees' behaviors that reduces your cost of incentivizing.

[3] TRADE EVENT REPORT
***********************************
Jupiter Advertising Forum Conference & Expo; The New Search Engine Marketing, + +
By Al Berrios

You could count all the attendants present with both hands. Ok, I'm exaggerating, but it didn't appear to have the energy or stature of prior Jupiter events I've attended ("Jupiter Media Metrix Online Advertising Forum 2001"). In fact, it's representative of the internet's diminished role in our business strategy… but they still keep trying to revive it.

I've been at the Crowne Plaza in Times Square in New York before, and pretty much knew I wasn't a big fan of it. The layout is awkward, the décor, gloomy, and the conference area obtrusive. However, as I'll be speaking there in September, I figured it wasn't that bad. I've certainly seen worse.

The food was hokey, but edible. Compared to the boxed lunches served at investment bank analyst meetings, where the sandwiches are so hard to chew, your jaw just gives out on you, these boxed lunch sandwiches were pretty good and chewable.

Although I would probably skip future conferences, I did get an opportunity to look into something other than email that has been interesting me lately, the state of the search industry. That's right, it's been almost 10 years, so it's an industry. In case you haven't been keeping up, search engine companies have been trying to convince other sites to use their software to power their search, just like Inktomi's original business model in the late 90s. Many succeeded, especially Goto.com. But then, they actually started making money. A lot of it. So, starting with Yahoo, who didn't want so much of their revenue dependent on other companies they had search relationships with, first bought Inktomi, the leading search software firm, then proceeded to recently buy Overture (like four weeks ago), formerly Goto.com, as you may recall, the leading pay-per-click search engine. The driving force has been a corporate need to make money from search. And Yahoo, after firing their founder for taking the company as far as it was going to go, hired new, more "experienced" management who has encouraged everyone else to go the pay-per click route. It didn't help that Google, the 800-pounder in search, was making over $100 million a year from pay per click - and on the down-low, too.

(As of this writing, the folks I spoke to over at Overture don't know how their recent acquisition is going to affect their relationship with their other big client MSN, but as that gets resolved, we'll have a clearer picture of the direction of the industry.)

In a demonstration given to me of the technology at this Expo, I was left stupified in the way it practically removed objective choices from search queries without the consumer's knowledge. Almost every search listing of common words that pop up on MSN is paid for and difficult to spot. As for Google's approach to advertising within its search listings, it works. It's easy to set up, clearly sponsored, and best of all, objective, returning choice back to the consumer. Consumers have responded by making Google a powerful filter of information online, with some 200 million searches going through its servers per day, according to Google. "Of roughly four billion Internet searches conducted in May, 32% were conducted directly through Google, compared with 25% for Yahoo and 19% from AOL Time Warner Inc., according to comScore Networks, an Internet market-research firm." (Mylene Mangalindan, Nick Wingfield and Robert A. Guth, "Rising Clout of Google Prompts Rush by Internet Rivals to Adapt", Wall Street Journal, July 16, 2003)

Today, Altavista, Metacrawler, Fastsearch, almost all of them have been bought up. Even, Dmoz.org, the Open Directory Project, is owned by AOL Time Warner's Netscape. (The difference between directories and search engines is that directories have editors that get swamped; engines are algorithms that operate based on different variables to place sites in searches). To check out more engines, visit our Software directory.

Based on these sort of trends, there is no longer any free way to submit sites to search engines, like in the good ol' days of the late 90s. There are two alternatives: wait until your site gets picked up by the search engine's bots (algorithms) which happens regularly or editors that scour perpetually, but irregularly, for new sites -or- start an account with several of these search firms, essentially buying up keywords, and wait until enough people click on them that your account's depletes and you have to refill with cash. Starting amounts are usually $25 - $50.

There are ways around this, of course. You can hire a search engine marketing agency or act yourself like a S.E.M. agency yourself. Search engine marketing currently works one of two ways: "partnerships" with all the search firms allows marketers to buy keywords in bulk and at a substantial discount, then resell them to advertisers at a profit (this is the new search engine marketing) -or- special software that is forever trying to outsmart the search engines by doing gimmicks with keywords and sites is sold via various distributors, none reliable. (These types of software users are called search engine spammers and are looked upon so negatively by search engines that they get blacklisted and their sites automatically removed from search queries. Search engine purgatory.)

There you have it... the new world of search engine optimization... it's enough to make someone want to stop being a marketer, and start consulting.

RELATED AL BERRIOS & CO. ARTICLES:
> "Why Searching is Important"
> Articles on Google and Yahoo

Disclaimer: The recommendations, commentary and opinions published herein are based on public information sometimes referenced via hyperlinks. Any similarities or likeness to any ideas or commentary from any other sources not referenced is purely coincidental. al berrios & co. cannot control any results occurring from advice obtained from this publication nor any opinion(s) conveyed by any reader of this publication.

(c) 2001-2005. All Rights Reserved. al berrios & company, inc. Published by al berrios & co. This Report may not be reproduced or redistributed in any form without written permission from al berrios & co., subject to penalty.