Gasta News: PAID SEARCH: How the paid search industry is killing itself

PAID SEARCH:
How the paid search industry is killing itself
It may not be as bad as the banking industry, but SEM could use some help. Here's how paid search can get itself back on track before things get worse.
As the financial markets continue to turn out bleak news, I've begun to think about the many parallels existing between Wall Street and the SEM industry.
Mergers, acquisitions and shotgun marriages
To start with, we're now in the middle of a wave of consolidations that are reminiscent of the successive mergers and takeovers now taking place in the banking sector.
Range Online is the latest independent SEM agency to pack up its tent, as it was folded into iProspect, which was itself acquired by U.K.-based Aegis some time ago. Range follows Outrider (bought by ad holding company WPP, which also owns 24/7 Real Media), Reprise Media (snapped up by Interpublic) and Inceptor (purchased by Verizon).
It's clear that many SEM agencies are having a tough time going it alone, and the shotgun marriage M&A trend will accelerate if the macroeconomic environment continues to deteriorate and the SEM industry -- like the financial markets -- continues to suffer from ills that are largely of its own making.
Search engines enabled this mess
The SEM industry has no direct equivalent to sub-prime mortgages, collateralized debt obligations or over-leverage, but it suffers from structural issues that are largely a product of its ostensibly self-serve nature. Google and the other engines have stoked the fever of irrational optimism by encouraging everyone to believe that all it takes to succeed at search is a credit card and a couple of hours studying the AdWords help file.
The result is a world in which marketers behave like self-medicating patients who believe that watching a webinar on urinary tract infections is equivalent to getting a consultation with an experienced urologist. The fact that a number of people believe they are more qualified to run search than the experts reflects a dismal lack of confidence in SEM agencies. So it's no surprise when expert companies feel that getting swallowed up by a larger conglomerate is preferable to going it alone.
Killing the golden goose
But the search engines aren't the only ones to blame. Like Wall Street's "shadow market," in which trillions of dollars worth of complicated instruments are traded without any oversight, the SEM industry has its own shadow industry -- the conference and trade show business. This business depends on a simple proposition: if you go to enough shows, attend the right panels and rub elbows with the right people, you'll walk away knowing enough to run a competent search campaign. This is as absurd as saying that you can become a qualified mechanic by attending an auto show.
The only reason conferences and trade shows are so profitable for the people who run them is that exhibitors remain willing to buy very expensive booth space. Heaven help the trade show people, however, if exhibitors ever actually read the shows' agendas, which are chocked with seminars on how to succeed without an SEM agency!
Greed may destroy us all
And now let's talk about greed, which is as rampant in SEM as it is on Wall Street. Too many SEM agencies seem to have taken their sales approach directly from Moe's Mortgage Shop. These agencies are commission-driven -- not service-driven -- organizations that don't realize that overselling their services actually hurts long-term revenue goals by disappointing clients, creating client churn and destroying reputations.
Unfortunately, even good SEM agencies get tarnished by the continued operation of the fly-by-nighters. The SEM industry has failed to purge itself of these people and I have zero confidence it will do so at any time in the future. If it turned out that Macy's was filled with pickpockets, don't you think people would stop shopping there? So yes, the SEM industry needs to choose responsible conduct over unrivalled greed, or we're all headed over a cliff.
How to bail ourselves out
I don't think the SEM industry needs a billion-dollar bailout, but I do think it needs to clean up its act. Cancerous companies, much like toxic CDOs, need to be cleansed from the SEM books before confidence can be restored. Paid search practitioners need to be meaningfully accredited, not merely rubber-stamped, before they can run search campaigns. The search engines and the shadowy SEM conferencing business need to stop pushing the ridiculously destructive notion that neophytes can become as qualified as those with years of experience after only a few quick lessons.
Finally, SEM agencies should start thinking seriously about sharing risks with their clients. Hopefully the seasoned, expert agencies will launch programs to limit clients' downside risks and help stabilize the SEM industry once again. After all, the world has more than its share of uncertainty to navigate through on a day-to-day basis, and all the "black boxes" in our industry can be mind-boggling. The least we can do for our clients is present the clarity they deserve when we engage with them.
Mark Simon is vice president, industry relations, Didit.

Gasta News: Sky Music

Sky is set to launch a digital music store, in a bid to take on the likes of iTunes, HMV and Tesco.

Sky has partnered with major Universal Music to enable visitors to download thousands of songs from its artists including U2, Girls Aloud and Kanye West.

The service will be available for a single monthly subscription charge and users will able to both stream songs on-demand and download tracks. Customers will be able to listen to tracks through a range of devices such as iPods, MP3 players and mobile phones.

Sky, which plans to partner with other major and independent record labels, for the joint venture service, said it will roll out the digital store later this year.

Mike Darcey, COO at BSkyB, said the service is being set up to meet consumer demand for online music.

"Companies like Sky and Universal Music are well placed to work together to meet consumers' needs. We aim to offer an easy and affordable service for all UK music fans, while ensuring that artists are properly rewarded for their creativity."

Lucian Grainge, chairman and chief executive, Universal Music Group International, said, "The new Sky service will provide a compelling digital music experience, built for the ever growing digital appetite of music fans. In a world where a majority of UK homes have high speed broadband access, consumers will welcome a safe, state-of-the-art service and legal alternative to those services which exploit musicians without compensation."

Gasta News: Brand turf war

Paid Search:Low intensity warfare on Google plains

Agencies aren't practicing what they preach when it comes to using paid search to market their brands, according to Adweek, and while these agencies are sleeping, some of their smaller competitors are using paid search to their advantage.

Buying your brand name would seem logical, but of the 56 agencies assessed by Adweek, only five had sponsored links tied to their names on Google. The others did not have paid search links, but their web pages generally appeared near the top of the search results.

"It's very difficult to recommend certain things to your clients if you're not in the game yourself," said Craig Conrad or Interpublic Group's Campbell-Ewald. "So often we're focused on our client business [that] sometimes it's easy to forget about our own brand."

While brand advertisers are up in arms over Google's lack of enforcement when it comes to piggybacking, it seems that some smaller agencies are actually using the practice themselves. A search for OgilvyInteractive yields a sponsored link for Stein Rogan + Partners, a small New York agency.

"Why not put ourselves out there as a viable alternative?" said Tom Stein, Stein Rogan's CEO. "It's a little bit of counter-marketing."

Gasta Advertising: CPA model

Gasta CPA Model is proving more and more popular.

Mason Wiley: Writing on Imedia Connection

Advertising on social networks can be very expensive -- with little payoff. Here's an easy solution to this cost problem.

Social networks are commanding attention -- for good reason. Millions and millions of people visit them daily (and to many an employer's chagrin, hourly). Given the sheer number of users and their length of stay, the big social networking sites like MySpace, Facebook and others should be an advertiser's paradise. But they're not -- yet.

Ironically, the huge number of impressions generated by social networks poses challenges for advertisers. For example, buying all those eyeballs on a cost-per-thousand (CPM) ad model can be prohibitively expensive for many. And unlike sites centered around a specific interest, social networks attract so many different types of people that targeting is difficult. Behavioral targeting offers promise, but hasn't yet evolved to the point at which it can guarantee a positive ROI.

A new ad model has emerged that can. The cost-per-acquisition model (CPA) provides advertisers with a guaranteed way to ensure ad efficiency, while also opening the door for social networks to monetize more of their traffic.

The benefit of CPA for advertisers
The CPA model is ideal for social networking sites because it eliminates virtually all the risk for advertisers of buying on a CPM basis. As a performance-based model, advertisers pay a fee only for the results their CPA campaign generates. That result can be any transaction specified by the advertiser. For example, an advertiser places a CPA campaign on ESPN.com. Rather than paying for all the people who see that ad, the advertiser only pays the publisher for each user that not only clicks on the ad but also follows through and completes the desired action as defined by the advertiser -- anything from an email submit or qualified lead to a sale or paid membership.

Through its 1:1 ratio of pay-per-action, CPA changes the rules for advertisers. The need for narrow targeting to eliminate ad waste becomes irrelevant since there is no waste. Similarly, there's almost no possibility for click fraud since advertisers only pay for results. And unlike CPM, the results of a CPA campaign are directly verifiable through tracking technology, which enables advertisers to determine which ads convert and which do not. For example, an A/B test of landing pages can be measured against the actions completed via any number of creatives or landing pages as well as the conversion processes. The path to purchase is easily tracked back to the source, including the placement of the original creative.

But the single greatest appeal of CPA for advertisers is that it is performance-based. With advertising costs directly tied to results, it provides them a way to advertise with full accountability and control. Advertisers simply establish the actions -- signups, sales, leads, etc. -- they want to reward, and establish how much they're willing to pay. If online publishers think the campaign will generate sufficient response with their audience base to meet revenue goals, they can choose to run the campaign.

Certainly, by running campaigns based on the promise of a potential future reward, publishers are taking a risk. But given that CPA campaigns are more aggressively focused on generating response than the many revenue-sharing campaigns available, it's a gamble that has been paying off for them. Now, social network publishers are finding that CPA can pay off for them, too.

The benefit for social networks
Like any publisher site, social networks want to maximize advertising revenue. Cost-per-thousand is the most prevalent model they use to do it, and it seems to make sense because CPM focuses on the number of impressions generated -- and these sites generate a lot of them. The problem is that these impressions come from an incredibly broad cross-section of the population, many of which can be irrelevant to a given advertiser. As mentioned above, although these sites generate billions of impressions, targeting the right ones is challenging. While targeting users based on where they have clicked (behavioral targeting) can help improve the odds, it is by no means an exact science or a guarantee that a sufficient number of users will perform the desired action.

These inherent challenges under the CPM model have limited the appeal of social networks for advertisers. The result has been a tremendous surplus of excess inventory that despite all best efforts just can't be sold. And a lot of those billions of impressions have gone un-monetized. But now that's changing thanks to CPA.

With CPM, the advertiser assumes the risk by paying the publisher for uncertain potential results. In CPA the publisher assumes the risk by running ads for uncertain potential payments. But when its remnant inventory at issue, the publisher runs no risk; it is inventory that would otherwise go unsold. So it only stands to reason that a social networking site will make more money running CPA ads on remnant inventory than it can just selling space based on CPM alone.

Conclusion
The CPA model is not new, but it has evolved to be a highly cost effective way for advertisers to use social network sites, and an effective way for social networks to generate increased revenue. And new widgets and applications are emerging for social networks that can make CPA even more powerful in the future.