Valuing Digital Goods

Social networks are brutally tough to monetize, especially when you consider hardware costs.

In response to Facebook's gift giving feature, Danah Boyd and James Hong both recently posted about gift giving and digital goods. Facebook's gift giving feature is time limited and donates the money to a charity, which allows them to collect market feedback without much risk, but there are ways they could improve it.

Danah posted

I think that Facebook is right-on for making a gifting-based offering, but i think that to make it work long-term, they need to understand gifting a bit better. It's about status. It's about scarcity. It's about reciprocity and upping the ante. These need to worked into the system and evolving this will make Facebook look good, not like they are backpeddling. This is not about gifting being a one-time rush; it's about understanding the social structure of gifting.

James, a founder of HotorNot.com, wrote

We found, last time we ran the numbers, that sending flowers increased the likelihood of a "double match" on our system by 4x.. meaning as a signal, they are well received and really work.

If we had priced them low, the flowers would have been worthless to everyone.

Self-Reinforcing, Self-Promotional Bias

A large part of making business successful is leveraging your authority and using nepotism to extend your sphere of influence. If things look a bit circular in nature that is because they are. Nearly everything you consume has a self promotional bias, but is that any reason to complain? Wouldn't be even scarier if the things you enjoyed and associated with were self destructing?

Examples of Self Promotional Bias in the Media:

If a politician pushes bogus laws (that they know will never be passed) for self promotion and news coverage then why wouldn't the media companies that grant that exposure also grant themselves some leeway? Do you think a news company owned by GE is going to publish a cover story about pollution by GE? Do you think Fox News will stand up against their big advertisers (even when their advertisers are responsible for causing cancer)? Of course not.

The bigger something gets the more hidden stakeholders it has to appeal to. Very rarely do owners get the opportunity to speak honestly about large companies. In many cases they are obligated not to in order to maximize shareholder value. I have had VCs offer to invest in me multiple times but have refused time and time again because I don't want hidden stakeholders controlling my actions.

People discouraging institutional analysis may say Noam Chomsky's Manufacturing Consent is a conspiracy theory, but why would it be? What business isn't biased toward their own self interests? Self preservation is a core goal of any institution.

Broken Egos:

Many junk products exist with demand driven by hype, spam, and scammy multi-level marketing, but many
business models exists because we as consumers have holes in our egos and want to lie to ourselves to justify our own flaws and actions.

As technology replaces the roles of many workers while making communication cheaper and easier, people have to do more to earn a living and it is harder to create new ideas, so we have to do more cause driven things to feel purpose and meaning in life.

We want to believe that ethanol
is providing cleaner fuel
even if creating it takes more energy than it creates.

As for the environmental impact, well, where do we begin? As an oxygenate, ethanol increases the level of nitrous oxides in the atmosphere and thus causes smog. The scientific literature is also divided about whether the energy inputs required to produce ethanol actually exceed its energy output. It takes fertilizer to grow the corn, and fuel to ship and process it, and so forth. Even the most optimistic estimate says ethanol's net energy output is a marginal improvement of only 1.3 to one. For purposes of comparison, energy outputs from gasoline exceed inputs by an estimated 10 to one.

Bias in Consumption:

Why is Fox News so profitable? Because it isn't really news. It is biased entertainment sold as news:

A new study based on a series of seven US polls conducted from January through September of this year reveals that before and after the Iraq war, a majority of Americans have had significant misperceptions and these are highly related to support for the war in Iraq.

The polling, conducted by the Program on International Policy (PIPA) at the University of Maryland and Knowledge Networks, also reveals that the frequency of these misperceptions varies significantly according to individuals' primary source of news. Those who primarily watch Fox News are significantly more likely to have misperceptions, while those who primarily listen to NPR or watch PBS are significantly less likely.

Just like how we want to believe certain lies to make ourselves feel good, we also consume things
that reinforce our identities and worldviews.

How many decidedly centrist political blogs are successful compared to the number of strong democrat and strong republican blogs? It is easier to trust things that are easy to relate to, and trust has more value than objectivity.

I probably read just about every blog post that links to my site because I want to know why people are
talking about me. Is that a self serving bias? Absolutely. But why wouldn't I have that bias?

Changing Someone Else's Worldview:

It is much easier to sell someone something they want than to try to change their worldview.

An SEO thought they were going to change the image of SEOs on Digg by writing a letter about SEO. After getting many votes it was promptly removed from the Digg.com homepage.

It is even easy for a well rounded guy like Scott Karp to view SEO in a negative light after seeing so much negative coverage of the topic. Scott was more receptive to feedback than Digg because he only needs to change his opinion, he doesn't have to go against the group think consensus on Digg to change his content.

It is easy to be popular as a politician in the US by hating terrorists, gays, and gay terrorists. It is easy to be popular on Digg by hating SEOs. Neither of those mean that the blind hate is correct or has any value (other than realizing it creates a market that is easy to exploit - because as a market they are targeted and already letting others exploit them).

Many business owners create business models that explicitly are designed to take advantage of the blind faith, bigotry, ignorance, and hypocrisy core to many popular religions, or other large self-serving authority structures.

Fighting Noise:

As markets mature, market leaders have less time to learn (because they are so overwhelmed with things to do). Given that publishing costs have dropped to zero and web business models are so scalable, is it any wonder that market leaders tend to read less and do more testing on their own (especially if they became a market leader as a side effect of learning)?

Aaron Pratt has recently whined about the circular linking patterns of SEO elites, even having a guest post by Michael Goldberg, but a comment on that post by Ahmed Bilal was spot on:

In any such environment the good will rise and then naturally protect themselves by strengthening their following (herd). If you want to get to the top (topple them, beat them, match them, whatever), you have to build your own following, your own herd.

What are we doing about this right now? Are you actively finding, reading and linking to one new SEO blog a day?

If you want to be read, then you have to be interesting and you have to attract attention. That's the way it works best - asking for attention or saying that you deserve it won't help.

And yet on my recent blog post about the recent Google (update algo tweak refresh whatever) Aaron Pratt said this:

I am not seeing any loss/gain of earnings in Adsense which leads me to believe their is nothing going on.

Being a good SEO is about noticing patterns beyond your own experiences and surrounding yourself with others who can do the same.

Notice that I didn't outright call the latest Google Update an update, because Google heavily controls that language and wants to obfuscate examination of their changes (wait for the official word from Google on the data push / update / refresh / etc). Just how Google controls their update language, their self promotional bias and control of search related language is largely responsible for the public perception of SEO.

My Experiences With Authority:

Less than 5 years ago I got kicked out of the military. Since then:

  • I have been flown to a college and asked if I want to become a professor, but I think I wanted far more money than they wanted to pay. Since then I have created numerous passive income streams that far exceed what they would have paid.

  • I have had multiple VCs want to by a stake in my businesses, but turned them down.
  • I have been offered to get published by a major publishing house, but turned it down because it would have screwed up my business model. There is no business model in getting published unless you are publishing a thinly disguised advertisement or need the publisher for credibility.
  • I have been mentioned in the mainstream media numerous times. Not typically for the stuff I know best, but more for getting sued and for being the person who spent $8 registering BlackHatSeo.com. I have had done some long interviews that have never seen the light of day because I was far too honest.

Those were all opportunities at traditional forms of authority, and generally I turned them down because they were not worth the cost. The point here is that generally I am not a fan of most authorities.

Becoming an Authority:

If you are new to the market you do have biases against you: capital, market knowledge, relationships and attention. But you also have the advantage of being able to take the time to create really cool stuff and do lots of tests because people are not expecting you to do lots of things every day, and you can learn from mistakes of those who entered the market before you.

To get market recognition in a saturated market you have to come up with new, interesting, or innovative things. And if you can't do those you have to at least cause human emotions...do things that appeal to people and make people feel love or hate. Look how new SEOMoz is and they are already on the 1st page of Google for SEO and got a ton of media coverage.

If bias toward known authorities is something that is a common flaw with humans and all social structures there is little value in complaining about it. Instead accept it for what it is and let it feed into your marketing. Sure the Good Old Boy's club sucks, but if you don't offer solutions, then complaints about flaws in human nature are void of meaning.

Via (RCJordan (WMW))

"Resource" is an encomium bestowed only by users; "authority" is bestowed only by previously recognized authorities. Anyone who calls himself either one, is just an ego with vocal chords.

Certified By...

One of the easiest ways to strengthen a leading market position is to give others in your market incentive to place your brand on their site. It is even sweeter if it comes with a link to your site.

  • Is your financial commentary SeekingAlpha certified?

  • Is your nursing site syndicated to NursingVoices?
  • Is your blog a member of the 9 Rules network?

Strong networks tend to take flow some of the market leverage and market exposure from the most powerful voices to newer sites.

Too many of these types of endorsements make a blog look cluttered, but it probably doesn't hurt to have one or two, especially if your site is new to a market with many established competitors.

These types of endorsement links can also be created in other ways, such as powered by Wordpress, free template by x, and syndicating wigets.

Create Value, Then Profit

Shane, an attendee from the first Elite Retreat, posted about why it is not best to monetize a blog right out of the gate:

So, your focus at the beginning has to be on attracting and retaining readers. You do that by having a great site, and nothing turns visitors off more than a brand new blog with just a handful of posts and ads splashed everywhere. It says to them that you’re more interested in making money than you are in providing good content. Who wants a site that’s all sales and no substance?

Tim O'Reilly noted that the failure of satelight radio is largely because they failed to put the customer first

Just remember how Google got their edge. It wasn't just pagerank and better search results, it was refusing to go the portal route, with intrusive advertising, and instead trying to figure out how to create a better user experience with advertising. Making ads non-intrusive and useful to their real customers was one of Google's biggest breakthroughs. (They will forget that at their peril.)
...
Today, you need to ride the wave of commoditization in both hardware and software, and build your value in new ways. Understanding those new ways is the heart of Web 2.0. And a big part of that is putting the user first.

Joel Spolsky recently wrote a great article offering Seven steps to remarkable customer service.

And, here I was, on this planet for forty years, and I couldn’t believe how much the three words “it’s my fault” had completely changed my emotions in a matter of seconds.

Seth Godin followed that up with a post titled Starting over with customer service:

I think the single factor that is killing this process and that is under the company's control is this: the desire to perform all customer service in real time.

The Golden Age of Pull Marketing

Since blogging has become popular there are far more people writing than their are good ideas to spread. This means that if you can create a good idea marketed at publishers looking for a scoop, and format the idea to spread you can probably get enough link authority to get a natural PageRank 6 in just about any market.

Obvious Story Seed Locations:

Each day the Digg homepage and Del.icio.us popular lists have new content posted. There are also a couple major channels in just about every field that people pay attention to. If you can get featured on any one of these you can capture the attention of a targeted market.

If you read and learn these channels, and then create, format, and target your content with the intent of capturing one of these markets or publishers it should be easy to get featured.

Following Up With Email:

Don't rely on any one channel to spread your story. If it gets blocked for any reason you want other back ups that will help spread your story.

While you have mind-share follow up with personalized emails. In some cases it might make sense to remind people that you were as seen on and in other cases (such as rivals like Gizmodo vs Engadget) that might offend them. Sometimes putting an as featured in link in your email signature is a more confident, more tactful, and less overt way of showing that credibility.

Is Sending an Email Spamming?

If you are carpet bombing cheesy off target link exchange requests for my-viagra-texas-holdem-mortgage--9.biz then that is spamming.

Many sites have a tips@blah.com email address. They are not being spammed when you solicit coverage of quality content...it is something they are asking for, and something they need to keep publishing cutting edge stories first.

Sure email is push, but the large gain from it is the pull of that channel. If it is targeted and personalized and they ask for it I don't see how they could consider it spam.

Realistic Expectations:

Email allows you to personally target your message to a targeted group of influential people. As long as it is well targeted and personalized it rarely backfires. You can't expect them all to work, but if you get exposure on a few channels that is all you need to seed the story.

People do not see or know of your emails that had little or no effect, they only see people talking about your site on the active channels.

News Half Life: Why Email is Crucial:

Once news is a week old it no longer is news. It is stale. Being featured on few premium channels all at once will cause a story to spread much further than if you try contacting them slowly over time.

Once something is years old it might be worth reformatting and turning it into news again, but if it is just a few weeks old it is much harder to get people to care than it is fresh off the presses.

Cascading Effects:

Being seen on a number of authoritative sites leads to more coverage. Recently I got a story featured on the Digg.com home page and sent out 2 emails to authoritative blogs. Both blogs covered the story, it made the Del.icio.us popular list, got linked to from Wired Magazine, and a couple hundred unique sites linked at it.

My only regret is that I didn't take the time to send out a dozen more emails. But if I didn't get covered in all 3 of those authoritative channels right away I might have only got a few links out of it. Each trusted independant citation makes it easier for people to trust the story as being valuable and important, and leads to a cascading set of inbound links.

Since their is so much attention concentrated on the top few channels and there are many more people writing than there are original thinkers or good ideas to spread these authoritative co-citations lead to many second tier site owners feeling that they need to publish the news too.

New Channel Discovery:

After spreading a few ideas you will find many other channels to target that you may not have thought of. Did you know that Recruiting.com was a Digg clone? Or that HGTV is adding a community feature? Or that MSN is using a Digg-like feature for news in some of their smaller markets?

Drifting on Someone Else's Story:

Some might consider it unethical to snag someone else's story, but many stories spread because they are formatted to be spin and lies. If you see spin spreading debunk it on your own site or directly on the site producing the spin.

Yesterday an analytics company posted a blog entry about what Google properties are growing and dying. I commented that I thought it was spin (clearly stating why). I knew lots of people would read that story and that some would read the comments on the page and link at me. At least one person did.

The earlier you debunk a story the more links you get as their story spreads.

The Golden Age of Pull Marketing:

Any indication of demand, any channel spreading stories, any story that is spreading...all of these are fair game to track and leverage for easy exposure. It is easy to see what ideas are spreading, who is spreading them, and what formats work. It is the golden age of pull marketing.

______________________________________

The Golden Age of Pull Marketing was a phrase Andy Hagans used in a phone conversation I had with him. I asked him if it was ok to make a post titled that. He said it was as long as I begged you to subscribe to the Tropical SEO feed. He also said he would love me long times if I asked for you to unsubscribe from Scoreboard Media while you were playing with your feed reader.

Hiring the Ideas Guy

As more and more content is created there are more publishers than there are good ideas, which means publishers are hungry to spread the few good ideas that exist. What separates a profitable channel from a money loser is typically two things: ideas and execution. Because I have been posting about a more diverse set of topics sometimes outside of SEO I get asked lots of business strategy questions. Many of them revolve around "and then I will pay someone $10-20 an hour to help with the strategy", but the problem is that if your strategy comes from someone else you are going to need to pay a lot more than that for GOOD strategy, and if they are willing to work for meager rates for a while and notice that all your value is built off their ideas it won't take long for there to be an ego conflict that causes them to quit working for you and start working for themselves.

Site design can be outsourced. So can programming, writing, and project management, but if you are not giving up an equity stake, and expect your workers to be the ideas guy eventually they are going to quit...at least if they have ideas worth sharing.

The reason consultants can charge $500 to $1,000 an hour is because they can create and spread good ideas that create significant market leverage and value quickly.

As an entrepreneur you either need to have a lot of capital to invest and/or be the ideas guy. And you need to excute.

If People Hate Your Writing Google Hates Your Website

I recently got asked to review a couple articles to see which one was better for Google. But the problem was that it was obvious that the writer did not know much about the subject they were writing about, based their content around a keyword list, and was not structuring the content for Google.

Gathering Background Information:

You can learn enough about a topic to sound intelligent about it if you just research the topic for about 10 minutes. Go to the associated Wikipedia page, search Del.icio.us for your topic, and find a few other articles that are research oriented (like the history of, industry background from trade organizations, trends, what people are blogging about in that topic, etc etc etc).

Automated Content:

If you are just trying to build traffic to get ad clicks until a site gets burned you may as well use automated content generation tools. Markov chains / RSS / Wikipedia / etc etc etc provide a large pool of easily recyclable information. Automated content generation is getting more sophisticated to where there is little purpose in manually writing an article unless you are creating something to be read by people.

The Trend Toward Real Content Becoming More Profitable:

If search engines get more aggressive at using user feedback as a quality signal the profitability of poorly formatted content will be drastically reduced. If people do not read your content then they aren't going to link at it either. Content without links only works if you operate in an undiscovered or uncompetitive niche - which eventually will get competitive when others find it.

More and more people are reading and writing online. As the amount of content increases the value of strong filters goes up. Thus if you have content that you can pitch to them it will spread virally. I recently created one good article for a client, pitched it to 3 websites, and it got well over 100 organic citations in the first week.

Writing for People:

Those same sources that make it easy to create automated garbage also make it easier to create real content. After you have strong baseline knowledge of the topic, general writing principals, and know how to package information then the packaging is the only difference between profitable and and unprofitable content.

General Information Packaging Tips:

If you are taking the effort to manually create content:

  • Write it for people

  • Using small chunks
  • That are easy to digest
  • Don't write a paragraph that is 400 words long
  • Format your content
  • Use headers and subheadings, as well as pictures, lists, and quotes to break up your content
  • Sound authoritative
  • Write with style and bias

ROI Matters:

If you are doing something as a hobby, then people should matter far more than search engines. In that case ROI and search engines shouldn't be much of a factor.

If you are doing something as a business, then either automate your content generation or write for people. The ROI of original hand crafted content that targets search spiders over people is not going to be something that promotes a long-term growing business.

Sure you can look at your traffic logs and use keyword lists to tweak the copy of important pages to include a few more modifiers and pick up more traffic, but don't do it so much that the page looks like it was only created for search engines.

If your content is focused on conversion and converts well then you can afford to buy advertising and acquire affiliates. And if you point a few more quality links at a real content page it will rank far better and be far more profitable than a hand crafted page that was created exclusively for bots.

Marketing Science

Without marketing great ideas go nowhere. Google's Larry Page recently stated:

"Virtually all economic growth (in the world) was due to technological progress. I think as a society we're not really paying attention to that," Page said. "Science has a real marketing problem. If all the growth in world is due to science and technology and no one pays attention to you, then you have a serious marketing problem."

Tim Berners-Lee, who created the WWW, wrote this in Weaving the Web:

People have sometimes asked me whether I am upset that I have not made a lot of money from the Web. In fact, I made some quite conscious decisions about which way to take my life. These I would not change - though I am making no comment on what I might do in the future. What does distress me, though, is how important a question it seems to be to some. This happens mostly in America, not Europe. What is maddening is the terrible notion that a person’s value depends on how important and financially successful they are, and that that is measured in terms of money. That suggests disrespect for the researchers across the globe developing ideas for the next leaps in science and technology. Core in my upbringing was a value system that put monetary gain well in its place, behind things like doing what I really want to do. To use net worth as a criterion by which to judge people is to set our children’s’ sights on cash rather than on things that will actually make them happy.

I have always been fascinated at the idea of bridging science with marketing because (from limited conversations I have had with various scientists) it seems that most scientists are nearly purely academic, or are populists who know little about their topic. It seems like there is not enough time for someone to do marketing and cutting edge research, or is there? And if/when you start marketing aggressively does it undermine the credibility of the scientific research?

Don't Write Nameless

I recently wanted to quote another writer who posted to a community site outside of my normal realm. On their profile page it had their nickname and their AdSense ID number, but no name. If it is hard to quote you then fewer people will quote you. Having a nickname for a brand is a good idea for some, but if you are a freelance writer or service seller it is a good idea to build an identity that is easy to attach to a real name. In an anonymous world people trust and gravitate toward things that seem human and real. If someone has to be a search guru or a person willing to sound like an idiot to quote you then less people are going to quote you. If nobody is quoting you then there is little point to being a writer.

Using a name (real or fake) is a way to gain easy credibility points amongst those who do not know you or your industry.

Alexa Data Gets More Granular

Alexa updated and now shows link data, top websites by language or geographic market, as well as your top geographic markets. They also provide a site report service where they crawl your site for broken links.

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