Vinny Lingham's Blog

Jeremy Palmer of Quit Your Day Job fame, has just launched PPC Classroom with Anik Singal. Jeremy has made over $1.4m last year in revenues, and has released a Pay Per Click training course program. Along with the training course, is a 6 week long, live webinar training series.

I am fortunate enough to be considered as one of the experts included in the course and I can thoroughly endorse Jeremy and wish him luck in this project. He also has a 30 day money back guarantee, and if you want, you can split the payments into three.

This training course is for those of you who are trying to get into the game and for those of you who are already in the game, and Jeremy has some great PPC tools that he built, that are included free with the training course with a money back guarantee!
There’s nothing to lose – try it out and if you don’t like it – just cancel!

If I sound like an infomercial, it’s really because I think what Jeremy is doing is great – with respect to increasing the knowledge in this industry, and as my new business partner on a new project which we’re announcing next week, I thought I’d give him a plug . I don’t want to squeeze too much exciting news into this one post – so hold tight for the announcement

For those of you who are in South Africa, and want a bit of hands on training in Search Engine Marketing, check out the training seminars offered at KeyJam.net, in Cape Town & Johannesburg, later this month and next.

I got the inspiration for this post from Llew Claasen’s post on the newly launched Thought Leader portal in South Africa.

In the world of Pay Per Click & Search Engine Marketing, the Dunning-Kruger Effect is probably the most prominent phenomenon within the industry.  This is very true specifically of traditional advertising agencies who brand themselves as “PPC Experts”, who use 3rd party software in order to manage their clients campaigns.  The use of 3rd party tools is not a bad idea, and I endorse products such as SpeedPPC, when used by those who are capable of running their own campaigns.  The problem that arise from the use of 3rd party tools, is that it doesn’t allow the smart marketers to think outside the box and make code level modification that can enhance a client’s campaign, as you would with proprietary software.  Clicks2Customers has built a very powerful proprietary platform that is not available to 3rd parties (except clients), as they utilize it to enhance their existing client campaigns and constantly are improving the platform and keeping it in line with industry developments, something that is difficult when you’re servicing 3rd party needs.

The Dunning-Kruger experiment was accurately based on the following hypothesis:

Kruger and Dunning noted a number of previous studies which tend to suggest that in skills as diverse as reading comprehension, operating a motor vehicle, and playing chess or tennis, “ignorance more frequently begets confidence than does knowledge” (as Charles Darwin put it). They hypothesized that with a typical skill which humans may possess in greater or lesser degree,

1. incompetent individuals tend to overestimate their own level of skill,
2. incompetent individuals fail to recognize genuine skill in others,
3. incompetent individuals fail to recognize the extremity of their inadequacy,
4. if they can be trained to substantially improve their own skill level, these individuals can recognize and acknowledge their own previous lack of skill.

The CJU conference as always has been great,  but in listening to some of people here (including Ad Agencies), I realise more and more that there are people in this industry who’s campaigns rely on other people who have convinced them that they are “Expert Search Marketers” or Agencies, and these people are really victims of people infected by the Dunning-Kruger Effect.   I had to sit through at least 2 sessions with people who are so infected with the DK Effect, that I had to take anti-biotics!  These people actually believe their own bullsh*t!

After getting a new client, we often find that they were being duped by their previous agency who believed that they knew what they were doing, but unfortunately, were relying on software built by people who cannot run campaigns profitably.  In most cases, the goal is to spend budget, and not generate profitable sales.

I often come across DK’s (Dunning-Kruger infected people), who just don’t realise how incompetent they are.  Hell, I’ve worked with them in my companies, but unfortunately, the only solution is not telling them they are wrong, but either letting them make their own mistakes, or if they’re willing, assist them by training them.   This is often not possible though, as many of these DK’s suffer from the Lake Wobegon Effect, which basically is “the human tendency to overestimate one’s achievements and capabilities in relation to others”.  When DK’s have both the Lake Wobegon Effect & the Dunning-Kruger effect, what you then have on your hands is a big problem.

What’s my point?  The Search Engine Marketing industry is filled with Charlatans, DK’s and LW’s who haven’t got a clue of how to build and run a ROI positive search campaign.  Instead, you have big media companies that hire age old executives who have never logged into Adwords, and tell them to run teams of dozens or even hundreds of people and manage client campaigns using tools built by another company.  With overhead that high, the goals are not ROI or Sales, it’s spending budget, being in position #1, generating sales from head & brand words, writing down negative ROI to “Momentum Marketing (Social Network BS)” or “Branding”, and meeting targets in order to pay the bills.

I had a chat with the founder of a UK based SEM company, and asked him why he didn’t change his model to performance marketing, and not % of spend – his answer was that he simply would not make as much money. Ok – so instead, he spends clients money inefficiently in order to line their pockets – great idea! Are you also being duped?

How do we change things? Well, for one, stop paying agencies a % of spend – if they can’t make money on revenue share or performance basis, then look elsewhere. Otherwise, play a flat fee for monthly services.  Do not use agencies that use 3rd party software – it’s like driving a car made of second hand parts from other cars.

Lastly, knowledge is power – so if you’re in South Africa, sign up for our newly launched SEM courses at KeyJam.net (shameless plug! )

Has anyone tested out SpeedPPC? It just launched now ( a few moments ago), and it looks quite pricey at nearly $500, but potentially it’s a very valuable product. A lot of what Clicks2Customers has been doing, is building (industrial strength) technology, that SpeedPPC seems to have recreated, in a focused package. Might be nice for newer/startup affiliates. I’ll test it out later this weekend, and give some feedback in the comments section here.

From their website:

SpeedPPC Package

The “SpeedPPC Campaign Builder” Software. This is the software that pulls the methodology together and gives the system synergy. This software works for both Google AdWords and MSN Adcenter.

The Landing Page Code. This contains the code that dynamically generates the landing pages to perfectly match each keyword. Includes example templates.

The Tracking Code. We will show you using very simple code how you can track across marketing channels, even through email autoresponder series that go on for years.

“Affiliate Datafeed Landing Page Generator” software for affiliate datafeed integration.This is some extremely powerful server side software that uses affiliate datafeed files to dynamically build as many landing pages as there are products. Think about this. Using SpeedPPC you can create a new ad group for every model name. Then send the prospect to a landing page for exactly the product they were searching for. Roll out hundreds or even thousands of ad groups that cover every model that an affiliate offers.

Special in-house best practices document for obtaining great Google AdWords quality score. We’ve learned many lessons on quality score. This document outlines the actual rules we follow in house. Many might surprise you!

Expansion lists including: US city names, US state names, Australian city names, Australian suburb names, UK town names, top 1000 movie names, top 1000 music artists, top 1000 actors, top 300 Xbox games, top 300 Xbox 360 games, top 300 PS2 games, top 300 PS3 games, cell phone model names, car model names, motorcycle model names, perfumes, cosmetics, digital camera model names, video camera model names, router model names, laptop model names, printer model names, occupations.You can use these expansion lists to expose lots of long tail traffic sources that you would never otherwise be able to easily tap into without SpeedPPC.

Update: Here is a video

Another Update: Jeremy Palmer has written a great review on Speed PPC that is definitely worth checking out, given that fact that I haven’t done one yet. Nice one, Jeremy!

*Disclaimer – I decided to insert affiliate links – feel free to buy through them – I make regular charitable donations!

So, if you haven’t heard by now, AOL is receiving their own version of Google Adwords (Private Label deal).

I’m not going to rehash the background and deal info, referenced at SearchEngineLand, but instead, I’ll try to explain what I see the market impact as being.

I’ve long argued the point that we should be able to price keyword by partner on all the major search engines, as they all have quite different conversion rates and “Not every click is created equally”, to paraphrase. The AOL deal has forced Google to make this move, and I think it will probably hurt their margin numbers and not just their revenues. Overall, it’s probably close to a zero sum gain as the money will flow to AOL, but their cut will just reduce. I haven’t done the math, but they might be just slightly worse off on revenues, but definitely down on margin.

Also, this impact will hurt many of Google’s partner sites that relied on high conversions from AOL to “slip” clicks through the door at higher than market value (respective earning or value per click), because of the fact that marketers cannot price each partner differently.

This is quite a complicated post, so please bear with me – I’ll try to explain this as simply as possible.

Currently, when buying Adwords ads, you pay a single price for a click & keyword that goes to Google’s distribution network.

For example (and I’m using hypothetical, BUT REALISTIC numbers here), let’s say that a keyword received 100 clicks and the breakdown by partner is as follows:

25 Clicks from AOL – 5 Conversions
50 Clicks from Google – 4 Conversions
25 Clicks from Google Partners – 1 Conversion

Total Clicks = 100 x CPC of 25c = $25 in costs
Total Conversions = 10 divided by $25 in costs, leaves us with a $2.50 CPA (Cost Per Acquisition)
Assume an average position of 3 and as you can see from above, AOL has the better conversion rate.

Let’s assume that your breakeven point is $2.50 CPA. Now, because Google runs a single blind marketplace, there is no price discrimination, which means that there is cross subsidization of keyword value (you pay an average price for everything, yet some clicks are worth more and others are worth less).

For the record, our logs indicate that AOL has the best conversion rate across all Google partners, and this simple means that if there is a separate marketplace for AOL, that prices across the Google Adwords network (especially direct) should fall, IN THEORY (see conclusions).

Now, let’s assume that we removed the AOL numbers:

50 Clicks from Google – 4 Conversions
25 Clicks from Google Partners – 1 Conversion
25c CPC x 75 Clicks / 5 conversions = $3.75 CPA

By AOL moving out of the marketplace, this would effectively mean that the remaining traffic would become too expensive, because AOL would not be cross subsidizing it (and obviously, they know this already, and that’s why they want their own marketplace). This would mean that prices would drop in order to offset the drop in traffic quality.

What would this mean for AOL?

$2.50 CPA x 5 Conversions = $12.50 / 25 Clicks = 50c CPC – almost DOUBLE what Google was raking in for them by cross subsidizing, is what the merchant would be willing to pay direct on AOL, because of the higher conversion rate.

Now, here are the possible conclusions vis a vis Google CPC’s:

1. Google CPC’s will drop as marketers move their spend directly onto AOL and adjust ROI’s according on Google. This will impact Google’s financials, as they will have to pay out a lot more money to AOL.

2. Google CPC’s will increase as dumb money floods the market because marketers are either too lazy or overworked to load AOL campaigns (highly unlikely in the long term) and instead they make it more profitable for Google to show Adwords direct ads for AOL, than AOL marketplace ads. I doubt this would occur though, but it’s a possibility.

3. Google CPC remain unchanged as AOL take-up rates are too low to impact the overall conversion number in the short to medium term.

So, logically speaking, by removing the “bane of mankind” *according to me* (Cross Subsidization) from the Adwords system, we as marketers will be able to align ourselves far more closely with the value per click.

Where do I get this insight from? Well, as an affiliate marketer, we have to watch the earnings per click very closely. EPC is a key metric and we are also able to distinguish (using our proprietary technology) the different conversion rates and therefore effective EPC’s per network partner for all the search engines. This data allows us to derive very accurate statistical models and also understand how the market is interpreted (well, as best as possible) by other players.

Every cent we spend is our own, so we have to ensure that we’re as closely aligned to value per click or EPC as possible, and therefore we’re very excited about the AOL prospects, but realise equally that it’s a lot of work.

I think this is a great move by Google and I applaud them. They’ve thrown the gauntlet down to the other search engines, and let’s see how they respond!

I has barely finished the eComXpo session and no sooner had James from the InsureMe Blog expanded (stole ) the themes of one of my upcoming blog posts that I was planning! Thanks a lot James! I’m going to write about it anyways!

Basically, James already details what I said during the show, but just to clarify what I mean by Return on Effort, here is my short and simple take on things:

The question was asked as to whether or not it is worth spending time on 2nd tier (non-Google/Yahoo/Ask/MSN) search engines and running campaigns with them.

There are a couple of key issues here, one is market growth (momentum) that Google in particular has, and the second is ROE (Return on Effort)
Let’s make the following assumptions for the US market search engine market (taken from VastPlanet):

Google Market Share = 53% (with AOL)
Yahoo Market Share = 28.1%

MSN Market Share = 10.5%

Ask Market Share = 5%

The Total for The Titans is a whopping 96.6%.

Now, until Snap, Become, Miva & all the other 2nd tier engines send traffic out of the massive :- combined 3.4% market share that they have & I can’t see the logic in advertising with them, and here is why:

If in one of our campaigns at Clicks2Customers, we have to allocate a campaign management resource to setup a campaign on a 2nd tier engine (which we don’t deal with). Now let’s assume for a decent sized researched campaign of 5,000 keywords with dedicated ad copy (as all engines are different and have differing editorial rules), it takes them 100 hours to do (and that’s quick, using our technology and existing processes).

Let’s assume that currently on Google, we are running with 50,000 keywords and generating $100k a month in sales and in our category, we’re getting 5.3m impressions (searches) per month. All things being equal, by the ratios above, the maximum searches we would get out of ALL the 2nd tier engines combined, would be 340,000 searches with 50,000 keywords. Let’s further assume that we went with the largest 2nd tier engine (not even sure who that is) and the engine had a 20% market share, then I’m going after a market of 68,000 searches related to my product/service – if you divide that further with the fact that you’re only loading 5,000 keywords – it would get scary, so I will neglect to include this in my calculations.

Again, ceteras paribus, if you just work out the back of the envelope stuff, then the absolute maximum that this traffic is worth to me if it converted even just as well as Google does is $1,283 in sales (which I highly doubt, as there are large amounts of Clicks Fraud on 2nd tiers). And that’s with a 20% market share which is not even possible in such a fragment tail-end market.

So, assuming I could spend my 100 hours on Google, and push my campaign performance up by just 10% with an extra 5,000 keywords, then I would be pushing the needle on my revenues by $10,000 (a nearly 400% increase in ROE), why would I bother with 2nd tier engines? I know the argument (from the 2nd tiers) is that it’s cheaper, etc – but at the end of the day, spending those hours improving clickthrough rates and other metrics like conversions etc, will translate into greater savings anyways on the majors like Google – so I don’t buy that argument.

Most Google PPC campaigns I have seen are not even 50% at peaking in terms of digging into traffic in the long tail, and most people are so worried being on other engines that don’t matter and waste their time there. Mine the Google keyword gold instead, and when you’re finished making triple digit gains, then go visit Yahoo and then MSN, and then finally, Ask.

Lather, rinse & repeat.
Someone today said to me that no one ever made a fortune by worrying about the numbers after the decimal. I think that this definitely holds true in this case.