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Monthly Archives: August 2011

Facebook to Spruce, AdParlor, Nanigans, TPG, etc: Share Your True Margins with Your Customers, It’s the Law!

A little birdie told me about a change to Facebook’s ads API development policy recently which reads as follows:

“You must, upon request, provide advertisers with a report on their ad spend, and your report must itemize how much advertisers spend on Facebook ads and fees for your service.”

There are several very successful Facebook advertising companies (most of which I named in the headline of this post) that charge clients on a cost per action (CPA) basis. In other words, they guarantee a conversion/sale/sign-up for a flat-fee and hope to make money on the difference between the amount they actually paid Facebook for the conversion and what they charged their client.

Depending upon how savvy the client is, this difference can be massive. Consider this hypothetical scenario: if a client buys 50,000 sign-ups at $5 CPA and each sign-up actually only cost the agency a $3 CPA, the agency is netting $100,000 a month in revenue from this client on spend of $150,000, or a 66% management fee! These days, a management fee of 15% is hard to come by for most agencies and anyone trying to charge 66% would probably be laughed out of a meeting.

My guess is that a lot of these CPA deals on Facebook have very high margins like this. Facebook’s policy now requires these Facebook agencies to disclose this margin – if requested by the advertiser – to their clients. Granted, few clients are likely to know that this policy exists (unless everyone who reads this post spreads it far and wide . . .), but any client that actually does make this request might be shocked – to the point that they either cancel their relationship with the CPA company or immediately demand a major discount off their CPA.

Facebook could decide, of course, to be much more aggressive with this policy and require agencies to disclose the differential between the CPA and the actual cost to acquire a customer, though I’m not sure how they would really enforce this. Who knows, this initial change in the terms may just be a first step. Facebook realizes how much money they are losing to these agencies – forcing agencies to disclose this info will likely result in lower margins for the agencies, which means a higher percentage of overall marketing investment going to actual Facebook advertising over agency profit.

 
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Posted by on August 26, 2011 in Uncategorized

 

Shunned Again from Speaking at a Conference, So Allow Me to Whine About It

I’m at SES right now, listening to the Advanced Paid Search Tactics session. I applied to speak on this panel (I spoke on it last year and I felt I did a pretty darn good job). This year, I got rejected from the session. Well, more specifically, I never received any notice from SES other than confirmation that they had accepted my request to speak.

Naturally, I was curious to know who made it on to the panel in my stead. Here’s the list of panelists, and the moderator who organized the panel:

Of these three folks, I only really know Matt, and he’s a darn bright guy who is a good, well-prepared speaker. I don’t know Mikel or Ben, but it does strike me as strange that Mikel decided that the best “panel” for this session was to have himself, one of his team members, and one other guy. It seems to me that having two people from the same company on the same panel is not the best way to advance advanced paid search marketing.

For the record, after my diatribe against SMX earlier this year, I did return to and speak at SMX Advanced (with Matt Van Wagner as the moderator), and I was truly impressed with the preparation that Matt put into the panel (though, for the record, some of the panelists never bothered to send in their presentations in advance or deign to participate on a pre-conference call). So perhaps my accusations of cronyism and laziness are now unwarranted for SMX. SES, it appears, may still have some issues.

Am I the best person to speak on an advanced SEM panel? Well, of course I think so, but I could also accept participation from many great SEM minds (Brad Geddes? George Michie? Frequent Blogation reader Terry Whalen?). Having two people from the same company and a three person panel – c’mon people, you can do better than that.

 
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Posted by on August 17, 2011 in Uncategorized

 

DUI Lawyer Needed for Friend in Trouble

I usually don’t post personal, non-SEM related pleas on my blog, so apologies in advance for this post. I have a good friend who got in a car accident last week. He was driving about 25 miles over the speed limit in a residential area and he was wasted. I think his breath alcohol content was close to .2, more than double the legal limit here in California. He rammed into the back of a car full of teenagers. Though none of them were killed, two of them are still in the hospital with broken bones and head trauma.

This is his first time in trouble with the law and he’s freaked out. The DA has said that he is going not going to give any mercy because my friend is a first-time offender, which means the sentence could be up to 10 years in jail if convicted. I abhor drunk driving as much as anyone, and there is absolutely no excuse for driving drunk, but this guy is a genuinely good citizen. He volunteers for charity, he’s well-liked, he’s got a stable job. Frankly, he doesn’t deserve to rot in prison for ten years – it would be a disservice to society.

Since he knows that I’m a law school grad, he’s asked me for help in finding him a DUI lawyer. I’ve thought this through and I think I know the profile of the type of lawyer he needs. Please read the profile carefully and if you know someone that fits this description, send me an introduction:

  • Must be a very smart person
  • Must be hard working
  • Must be inexpensive – no top guns that are going to charge $300/hr, I’m thinking that perhaps a recent grad or even someone who is still in law school will fit the bill
  • Specific knowledge of DUI law is a nice to have, but not a necessity
  • Courtroom or trial experience is also a nice to have

If you know anyone that fits this description, please email me ASAP.

Now, before you accuse me of being a bad friend, the above story is completely fictional. 100% made-up. I don’t have a friend with a DUI charge, and I don’t need a lawyer. And if I did have a friend in trouble, the last thing I would do would be to try to find him an inexperienced, non-DUI expert to represent him in what might be the most important moment in his life.

And yes, in the SEM world, this is apparently the attitude of some people looking for SEM help. If you don’t believe me, just take a read of a recent blog post over at Search Engine Land. Here are a few the key points the author makes in support of his argument that you don’t need SEM experts to run your SEM campaigns:

The right person for PPC management on your team does not necessarily have to be an expert in PPC. I have found that it is better to have personnel with the right skills sets (strong copy writing, math, analysis, and research skills) which broadens the job pool and decreases expert leverage for salary requirements.

I have hired three people to do PPC management for my large campaigns. None of them had PPC experience. There is a learning curve, of course, but it worked out better and saved money in the long run.

I responded to the author in a comment (well, actually several comments) on the original thread. In relevant part:

The thing about SEM is that it *looks* easy. And, in fact, just adding keywords, negative keywords, ad text, and basic bidding are easy. Its the rest of the stuff – the stuff that can actually drive huge profit – that isn’t easy.

Poker is an easy game to understand and learn. Trying going up against a pro and you’ll understand that a game that seems “not that complex” is anything but. But every day in Vegas folks come in for the weekend convinced that their mad skillz they’ve perfected playing their buddies in the basement are going to make them big bucks in Sin City. Usually doesn’t work out that way.

Its the same thing with SEM. There’s a lot of ‘dumb money’ on AdWords – completely mismanaged campaigns by folks who have read the AdWords Learning Center and are convinced they know all they need to know about SEM. They may even make a little profit too, assuming they are either in a low competition vertical or happen to have a very cool product that sells itself.

For the most part, however, they are 25-40% under-optimized. Google makes a lot of money that way. Again, not saying that this is you, but I am saying that true SEM experts can crush anyone who thinks SEM is straightforward and can be handled by a bunch of smart, non-experts.

No one would consider hiring a “smart amateur” to represent them in court, perform surgery on a loved one, or dispute an audit with the IRS. Google, however, has done an amazing job of convincing laymen that AdWords management is an exception to the rule that hiring professionals is necessary for great results. No doubt this makes money for Google, in that it encourages more advertisers to try their luck at SEM, and it also pushes dumb money into the system. A side effect of these advertisers is increased costs for smart advertisers, as dumb advertisers over-bid and/or spend money on keywords they shouldn’t be buying at all.

A lot of life is admitting that “you don’t know what you don’t know.” I’d never sell myself as an SEO expert, even though I think I know quite a lot about SEO. For that matter, despite going to law school (and graduating with honors, thank you very much!), I’d never pretend to know enough to represent someone in court. Tons of experience, expertise, and intelligence is what turns someone into an expert. And a good expert is worth every penny, which is why they tend to charge a lot. So if you want to save money, go ahead and hire that recent college grad to manage hundreds of thousands of dollars for you on AdWords. Oh, and if you are planning to go skydiving any time soon, I hear you can get some great deals on slightly defective parachutes at the outlet mall!

 
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Posted by on August 15, 2011 in Uncategorized

 

We Are Liiiii-ving in a Services World, And I Am a Services Guy

America is a service-driven economy. By that I mean that the number of factory and agricultural jobs are decreasing and the number of service jobs are increasing. Recently it occurred to me just how many service-providers I hire in a given year, for personal use. The list (off the top of my head) includes:

  • Babysitter
  • Gardener
  • House cleaner
  • Nanny
  • Massage therapist
  • Taxi driver
  • Valet
  • Accountant
  • Doctor
  • Lawyer
  • Dentist
  • Car detailer
  • Business coach
  • Graphic designer
  • Handyman
  • Painter
  • Realtor
  • Mortgage broker
  • Fishing guide
  • Banker
  • Mechanic
  • Tow truck driver

This doesn’t even include some of the everyday service people I use, like waiters, baristas, BART drivers, and janitors. And I’m not including business service providers, like HR, payroll, etc. The bottom line is this: if you think about how much you use service providers, you’ll realize how important this sector of the economy is!

You’d think that anyone in the services business would be responsive, friendly, and organized when it comes to attracting new business, but I’ve recently been amazed at how pathetic many service providers are at the basic of good sales. A few examples come to mind (all of these in the last two months):

  • Being asked for a proposal and not providing one for six weeks!
  • Scheduling a demo and then forgetting to actually show up!
  • Scheduling an in-person meeting and then canceling five minutes before the start of the meeting!
  • Receiving a request for pricing and never bothering to respond!
  • Running a sales call from a loud street or with a lot of noise in the background!

I could go on and on. It goes without saying that a service person/company that can’t even provide good service during the actual sales process is unlikely to do much better when it comes to the actual “service” part that you’re buying. For me, a lack of professionalism in the sales stage is a very easy way to eliminate a potential service provider from contention for my business.

I should note that this happens both in personal and business settings, but it’s even more amazing when it happens in the business world. My agency is not the 800 pound gorilla of online marketing (yet), but our clients collectively spend between $50 and $70M a year on online marketing, so it’s not like we’re chopped liver. And yet, I routinely run into shocking incompetent sales organizations that seem to go out of their way to prevent me from giving them sales.

I don’t really know why this is the case. Obviously there are lazy and inept people in the world, so that explains part of it. There are also some companies that are just in really high demand and apparently this means that their salespeople can take a laissez-faire approach to selling. But a lot of the examples I discuss above don’t seem to fall into either of these categories; the salespeople seem smart and savvy and the businesses seem to be doing well, but not so well that they can just drop sales left and right.

What am I missing here?

 
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Posted by on August 3, 2011 in Uncategorized