Google Adwords with a private label / White label

In Norway, several search engines are trying to compete with Google. They're having two basic problems:

• Relevance
• Ad platform

In terms of relevance, sesam.no is doing a great jobb. They are incorpating Norway specific content like telephone listings, company information and Norwegian newspapers. Sesam is taking advantage of their location.

Sesam's main problem is the ad platform. They currently use Yahoo Search Marketing, which is far inferior to the Google Adwords platform(even after they upgrade to the new Panama platform in Europe).

So Sesam basically has three choices:

1. Build their own ad platform(which I think they're trying to do)
   
2. Use Microsoft Adcenter, Yahoo Search Marketing or Ask's ad platform
3. Approach Google and get a private label version of Google Adwords
   

If they choose option on, they will most likely fail just like Microsoft and Yahoo have with their "new" platforms. They've spent million of dollars on development and they're still far behind Google Adwords.

If they choose option two, they have a better chance of succeeding since they benefit from the resources of the larger players.

The last option of private labeling Google Adwords is the most interesting one. This option has probably not even been considered, since it may not be possible. I think it would be interesting to explore. The advantage to Sesam is that they would get a user friendly and scalable ad solution that would be easy to fill up with advertisers(because advertisers already know how to use it). The advantage to Google would be that their platform would become the standard for internet advertising(it probably will anyway..) and at the same time assisting a smaller player generate more revenues. If Google's goal is to make Adwords the standard platform for all internet advertising, it would be a great move.

As Sesam continues to burn money, another Norwegian search player is way off. I recently blogged about how Kvasir is failing to understand (in Norwegian) the importance of an automated ad solution and they responded that they thought is was really important that their "talented" sales people took care of their advertisers communication. To me that seems very strange since the majority of Google's revenues comes from the Google Adwords platform.

Click revenues generated by bidding on brand names should go to the brand owner

Search engine marketers know that bidding on strong brand names is a great method to generate sales.

E-mail marketers know that a brand name in the e-mail subject line usually increases the open rate.

Online marketers know the power of branding in purchasing processes. Customers feel safer when shopping on well-known websites and the conversion rate on well-known sites will be higher(if all else is equal).

Brands are important. Large and small companies around the world are struggling to protect their brand names in all marketing channels.

Among the strictest are Nokia and Apple. If you are a mobile phone dealership and you would like to promote your product using Google Adwords, you have to ask Nokia and Apple for explicit permission to bid on terms that they own, i.e. Nokia and Apple iPod.

Instead of refusing advertisers to advertise on brand terms, Google should offer the brand owners a chance to make money when people bid on their brand names.

This is how it would work:
- An advertiser bids on the term NOKIA.
- An automatic e-mail is sent to NOKIA requesting permission to advertise.
- Click revenues generated by bidding on brand names should go to the brand owner
- Google should be paid a transaction fee for enabling the brand name rent

If this implemented the brand owner will always be able to spend more on protecting their brand in Google. The brand owner could pay more to affiliates and afford a higher cost per click. Google would avoid expensive lawsuits while enabling brand owners to spend more on keyword advertising.

Win - Win - Win.

Interesting statistics:
Hitwise Research shows that Internet users are increasingly searching by brand - 75 of the top 100 search terms across all categories in February 2006 contained brand names, an increase of 17% versus February 2005.

Microsoft Adcenter 0.1 - What were they thinking?

I continue to follow the different ad platforms from the major search engine companies. I'm still shocked that Yahoo and Microsoft were not able to launch a better ad platform after pooring milllions of dollars into development. Both companies understand usability, but it seems that they have ignored usability and speed in the new ad platforms.

Here's my top list of ad platforms:

1. Google Adwords - by far the best plaform. Improvements are made monthly and Google continue to impress me.
2. Ask Paid listings - I've only just logged into this. It looks good, but lacks quite a few features
3. Adbrite - interesting solution.
4. Text-link-ads - another interesting solution
5. Yahoo Search Marketing - Better than the old Overture platform, but it failed to reach my expectations.
6. Microsoft Adcenter - Microsoft - What were you thinking?


After reviewing these platforms, I'm confident that it will take a few years before the other players catch up to Google.

Salesforce.com and Google Adwords combined

Another smart move by Salesforce and Google. In a lot of organization there's a divide between sales and marketing. With this new initiative by Salesforce.com and Google, the gap between sales and marketing becomes smaller. It's now possible to compare the effectiveness of a cold-call and a Google Adwords-campaign. What a blast.

Check out the video that explains how it works

An Investment Approach to Marketing

This article explains how to use web analytics to help guide your marketing spending. It contains step-by-step instructions on how to get the most out of your marketing dollars.

A major goal of any company, large or small, is to maximize the value of their marketing budget. To do this, many companies strive to calculate how much a new customer is worth in terms of future sales – the customer’s “lifetime value” (CLV) – in order to determine the ROI of their marketing efforts.

Calculating Customer Lifetime Value

As I stated above, the customer lifetime value approach tries to estimate how much each customer is worth in dollars over the lifetime of their relationship with the company and thus discover exactly how much a marketing department should be willing to spend to acquire each new customer.

However, this approach has many challenges and often ends in failure. Why? The main reason is that in most cases these CLV models become too complicated for practical usage and therefore have little value.

The basic calculation appears quite simple upon first glance. You merely establish the customer lifetime value by estimating the average profit per sale (total revenues minus marketing, advertising and fulfillment expenses, divided by number of sales). Then you factor in how many times the average customer will purchase from you over a certain period of time (e.g. 3 years).

On the surface this seems like a quick and easy calculation. In reality, each step in the process is filled with challenges and presents opportunities for discussions and doubts. Many companies stumble due to the lack of data.

Others stumble because of senior peoples’ different opinions on which factors the CLV model should contain and how to calculate them. Disagreements usually arise when you try to:

• Determine the how much of the fixed costs should be allocated to each acquired customer


• Estimate the percentage of customers you lose


• Adjust for how many customers you would get with no marketing activities.


• Adjust values for cannibalization between channels


• Estimate CLV adjusted for seasonal changes or other complex factors


• Include the value of referrals in your calculation


• Segment customer groups or calculate one overall number for the company

Simplicity is Genius

Instead of getting into long discussions on how accurate the customer lifetime value needs to be, one should focus on simplifying the model so that ordinary people can actually use it to make smarter marketing decisions on a daily basis.

Jack Welch, former CEO of General Electric, once said:

"Simple messages travel faster, simpler designs reach the market faster and the elimination of clutter allows faster decision making."

In order to simplify the model, we need to accept that CLV calculations, as with all other marketing forecasts, can and will be inherently inaccurate. So instead of seeking to create a better CLV model, we should choose a simpler method of determining which marketing mediums to use.

One simple method that you can use is marketing cost per sale. The marketing cost per sale is calculated by dividing your total marketing expenditures in a certain time period by the total number of sales generated in the same period. This calculation gives you some insight into the return on investment of each marketing dollar while avoiding the complexity of CLV. It is fast, simple and thus powerful.

Simple Messages Travel Faster

For example, if your marketing budget is $2,000,000 per month and you sell 5,000 widgets in the same month, your average marketing cost per sale is $40.

A lot of seasoned marketing professionals will debate the accuracy of this simple model. When this happens, it's important to stay focused on the actual goal of the model, which is to provide marketers with an easy-to-use tool that they can use to make smarter marketing decisions on a daily basis.

Practical Usage:

Monthly marketing budget: $2,000,000
Number of widgets sold per month: 50,000
Average marketing cost per sale: $2,000,000 / 50,000 = $40

If I invest $50,000 in a banner ad campaign on www.vg.no (Norway'slargest newspaper) and get 2,500 sales from the campaign, the marketing cost per sale is $20.00.

If I invest USD $20,000 in a banner ad campaign on www.dagbladet.no and get 2,000 sales, the marketing cost is $10.00.

If I invest $25,000 on Google Adwords and get 6,250 sales, the marketing cost is $4.00.

If I move the $70,000 I spent on banner ads over to Google Adwords, it would give me 17,500 sales instead of the 4,500 sales I obtained with the $50,000 and $20,000 investment in newspaper banner ads.

Of course, there is a limit on the search volumes but until you reach that volume, the goal is to move your marketing budget gradually over to the channels that have the lowest marketing cost per sale. The idea is that if I can identify a marketing channel that gives me more customers for the same budget, a natural reaction should be to allocate more marketing money into that channel.

How to Get Started

In the Medium ROI report in your web analytics software(i.e. Google Analytics, Clicktracks, Webtrends), it is possible to accurately measure the results of different online marketing activities (banner ads, affiliate programs, search engine marketing, e-mail marketing). You can tell exactly how many sales your latest e-mail campaign generated and how your banner ads do compared to your search engine marketing efforts. Then by simply dividing by the marketing costs for the different activities, you can estimate the marketing cost per sale in each channel.

Since it's very difficult to measure the effect of offline advertisements (TV,radio,etc), we can make the assumption that the cost per sale from these channels is equal to or greater than the average cost per sale for all marketing activities. Many people will argue that this assumption is too inaccurate and/or biased but, more likely than not, the cost per sale for offline activities will be much higher than the average cost per sale for online activities.

Cut Costs and Report results

At the end of every month, you should take a look at your marketing allocation chart to see whether you managed to move money into more cost-effective channels. If you continue to gradually move your marketing funds towards the low-cost channels, you'll see marketing savings for your company. Your monthly marketing allocation might look like this:

All numbers are fictive numbers

A good salesperson knows what it takes to make a sale. They know how many phone calls they have to make to set up a meeting and they know how many meetings it takes to make a sale.

A good marketer should also know what it takes to make a sale. They should know how many searches/impressions have to be made to get a qualified click and they should know how many qualified clicks it takes to make a sale.

Sources:

Marketing at Wharton

Jack Welch quote

Clickz

KP's blog