The Value of Perception (and the Perception of Value)

Rich Schefren recently interviewed Dan Ariely. The recording is freely available online here. In the call Dan highlights how companies can increase perceived value and get their customers to spend more by creating a decoy offer, which is discussed in the first chapter of his Predictibly Irrational book.

The decoy marketing offer introduces false choices to make another choice look more appealing. We have a hard time valuing offers, but are relatively good at valuing relative deals. The example Dan uses to discuss the decoy is the pricing of The Economist.

Lets say the pricing is

  • web $60
  • print $120
  • both $120

Given the above virtually nobody will order print, but adding the false choice of print only will make many people buy the both option, whereas if the print option were priced lower or the print option were not there more people would be inclined to opt for online only instead of the web +print combination.

Non-commodity based value is largely a game of perception. You can build perceived value by

  • building exposure and trust in the marketplace by giving something of value away for free (people will think "if this is free imagine how good the stuff they are selling is")
  • minimizing downside risk (through the use of payment plans, refund guarantees, etc.)
  • comparing yourself to higher priced offerings (the words SEO training are considered far more valuable than the words SEO Book - something I wish I would have considered in 2003!)
  • expanding your target market and resonating with niche brands (what is the difference between Prozac and Sarafem?)
  • breaking the language of a commodity product and reshaping it to associate it with higher value fields or fields with less competition (Starbucks language sounds more like fancy tea than a I need caffeine cup of coffee)
  • using scarcity (how much did Beanie Babies, Pet Rocks, and Tickle Me Elmo dolls sell for?)
  • requiring prompt action (when we ran a discount during the launch of our membership site people joined at a much faster rate before the price increased because the price increase was a real tangible cost of not acting quickly)
  • adding bonuses and benefits that are unique to your offering

Everything around us is a collage of overlapping value systems competing for attention and resources. What backs the value of the U.S. Dollar? Why has it fallen 20% in the last couple years? Housing prices went up for a long time, and then they stopped. Last year Indymac bank was a top 10 mortgage lender and now they are bankrupt.

Many investors shorted Fannie Mae and Freddie Mac. In response to deteriorating business conditions the U.S. federal government offered to allow the companies to borrow directly from the Federal Reserve and increase their borrowing limits. That help stabilize their stock prices a bit.

What really scared investors away from shorting the stocks further? A proposal from the White House to Congress would give the U.S. Treasury authority to buy the stocks to provide needed liquidity. Imagine betting on a company failing when your government says that they are interested in buying stock in the company if the company gets in a pinch. That is the sort of news that can send a stock price up 40% before the market opens.

Why would the government care about the stock prices if they have little to do with the functionality of the businesses? It all comes down to perception. A healthy stock price gives the perception that all is well and helps keep the housing market as fluid as possible, whereas low stock prices erode confidence and evoke a sense of fear, which adds a lot of risk to an already unstable housing market. Perception becomes reality.

The Grass is Greener...

One of the easiest ways to scale a business model is to rely on user generated content. This effectively turns readers into writers (free content) and marketers (brand evangelists promoting their own work). But at the same time it makes it hard for readers to keep reading all the content produced from those sources.

We subscribe to personalities and known shared biases. I read everything that John Andrews writes. I read everything Barry Ritholtz writes. The same can't be said for many group blogs. The option to water down what you are doing for a short term revenue boost will always be there, but the ability to re-gain attention and trust that was thrown away in the process is not.

The grass is not, in fact, always greener on the other side of the fence. Fences have nothing to do with it. The grass is greenest where it is watered. When crossing over fences, carry water with you and tend the grass wherever you may be. - Robert Fulghum

Misinformation / Information Pollution Adds Value to Paid Content Business Models

The SEO market is flush with free information, but many times the free information is factually incorrect, which can cost a lot of money to anyone building a business based on such information. The cost is not immediately readily transparent, but eventually it appears. By the time it does many people who lost money from it may not be aware of what happened, as their attention is already elsewhere.

There are a variety of reasons for misinformation to spread

  • stale search relevancy algorithms that rank old information because it was published on a leading site in 2001
  • intellectual laziness, reductionism, and lack of openness to the experience of others
  • affiliate programs and business models rendered useless by marketplace changes, but still profitable because they can be sold at a low price point and have no real costs associated with them
  • search engines trying to hide their secret sauce

I thought I would give a few examples of commonly spread misinformation.

There Was No Ranking #6 Penalty / Filter

If you read the comments here you will see how bad I was roasted for suggesting that there was a #6 ranking issue on Google. Matt Cutts stated that he was unaware of such a penalty, and that was the official word until Matt came said they found and fixed the issue.

Where is the harm in that? Well, if you took Google's official word as being accurate, you never had a chance to survey this glitch. Glitches often reveal engineer intent and give you an early warning to make the changes necessary to keep your sites ranking before the new relevancy algorithms launch.

Google Does Not Care About Domain Names or TLDs

Some people believe that domain names and domain extensions do not matter. After seeing Google temporarily drop .info domain names that was a pretty clear indication to me that they did not think as highly about .info names as they do about some other extensions.

For years current and past Google employees have denied that domain names mattered much in the relevancy algorithms, going so far as calling the domain name "a relatively minimal factor" (in 2008 no less).

Matt Cutts eventually confirmed that domain names have value at a domainer conference

Generic domains that users are likely to remember, will indeed carry more weight than others. There is a real value to those FuneralHomes.com for example. Google does give keywords in the URL a certain amount of weight, but you don’t need it in order to rank.

But people still blog discounting it because they have not tested it.

.edu Links do Not Matter Much

Here is a lovely SitePoint forum thread where the moderator claimed I was full of crap and I responded with more background context on his claim. He deleted my post and banned me for life. About 5 months later Matt Cutts confirmed my hypothisis:

But, certainly, all of the things that have good qualities of a link from a .edu or a .gov site, as well as the fact that we hard-code and say: .edu or .gov links are good - and when there are good links, .edu links tend to be a little better on average; they tend to have a little higher PageRank, and they do have this sort of characteristic that we would trust a little more. There is nothing in the algorithm itself, though, that says: oh, .edu - give that link more weight.

But I still have a lifetime ban from the SitePoint forums for being more open-minded and attentive than their SEO moderator is.

Free & Easy is Often Wrong!

The simple / easy answer is often the incorrect answer. Many algorithmic changes (-30, -950, the sandbox effect) are written off as anomalies by many people who do not experience or understand them. But, for the sandbox effect, a couple years ago if you knew that you could create a subdomain off an established site and then later 301 redirect it to a new domain you were able to rank quickly while competitors thought there was a 6 to 12 month wait needed in order to rank.

It is not that forums need to go away, but we need to do more experimenting on our own, and we need to learn who is trustworthy. The web is still a highly inefficient marketplace, but each day it moves a bit closer toward being efficient. Google believes in security through obscurity, so if you have to wait for an official comment by Google then much of the arbitrage opportunity of a technique is already gone!

The 200% to 1,000% year on year ROI you and I currently enjoy will not last forever. Getting correct information early in context helps ensure you have better information than the general public, which should help boost your ROI if you act on it.

Does Your Website Make People Angry?

Just as it is good to invest in structural change it is good to invest in restructuring debates and reframing ideas.

When we consume media one of the biases we often overlook is our own. When NPR created their Budget Hero commentors quicky stated things like "it's too liberal" and "they used right wing think tank as a *credible* source." Such statements reveal as much or more about the reader as they do about the media.

When you know a field better than most people producing media in your space it is easy to denounce everyone who knows less than you as being full of crap. Dr. E. Garcia, a brilliant Information Retreival scientist, makes a habbit out of roasting me because I have a more practical and less academic experience in the space.

While he feels my work is not up to his standards, the work he denounces helps people gain top rankings in Google and is getting free inbound links. Even better, I syndicated some free Creative Commons licensed content on latent semantic indexing called Patterns in Unstructured Data. Dr. Garcia thinks I know nothing about the topic, but when the original source went offline I started gaining citations as the source for that work too! Am I a leading expert on academic information retreival? No. I read some of Gerard Saltan's work, but my experience are more well aligned with finding the criteria necissary to rank in Google.

Web Designer Wall recently published an SEO guide for designers. In it they stated "Most people aim for a keyword density of 2%." I am not sure where they got that stat from, but generally the document was fairly well done and I am glad they cited me as a resource. I could be envious of the exposure their article got and try to rip it to shreds, but where is the benefit? Dr. E. Garcia flaming me generally does nothing but flow PageRank my way. So be it...you know you are doing something right when people hate you. ;)

Chris Anderson, famous for the Long Tail, recently had his long tail strategy ripped apart by the Harvard Business Review.

Chris does not mind though...he is already on to debunking the scientific method!

But faced with massive data, this approach to science — hypothesize, model, test — is becoming obsolete. ...

There is now a better way. Petabytes allow us to say: "Correlation is enough." We can stop looking for models. We can analyze the data without hypotheses about what it might show. We can throw the numbers into the biggest computing clusters the world has ever seen and let statistical algorithms find patterns where science cannot.

Mahalo offers virtually nothing original or of value, but it is worth more than most websites because Jason was good at making people angry. There is greater value in evoking emotions than being the person who's chain is jerked by people writing with the express intent of making you angry.

Writing for Buyers vs Writing for Cynics

6 fundamental laws for online publishing

  1. Most popular free online content contains factual errors, but it is still popular due to an affinity readers have for the author, and/or the ease of understanding what they are writing.
  2. The more you know the easier it is for you to denounce someone who knows less than you in your field, though doing so will rarely build brand loyalty, and often attracts the wrong kinds of customers. Call this phenomena the Threadwatch effect...good for attention, but bad for monetization. This is especially true since people new to the market are willing to spend money to build their businesses, but more established market players are more ad blind and more cynical to most commercial offers.
  3. If you are selling stuff online you are not your own target audience. Every field has far more novices than experts, and experts rarely buy because they feel they already know everything and have got burned so many times in the past.
  4. Most online content is recycled. Local substitution is a fact of life, and probably has been for thousands of years, only now it is faster and cheaper. Unless you add pretty pictures, write for novices, and aggressively market your best content at launch someone is going to recycle it (with errors) and get credit for your work. Competing publishers can polish up posts you wrote *years* ago and be called a visionary for doing so! If you are not making your work accessible to novices then you lose.
  5. The more mindshare you have in your space the easier it is to get weak references from people outside your space who occasionally graze upon your topic. When people who know little about your topic look at your field they care more about format than accuracy because they typically do not realize when they are reading factual errors.

From a business perspective, one of my bigger errors with this site is that I tend to write more for the cynical person who loves SEO than for people newer to the field who are more likely to buy. That is not to say that we do not have people sign up every day, but that we are only targeting the fraction of the customers that we could.

The hard part about changing is that I typically write about what interests me the most, using my own interests as a filter. Dumbing things down would be walking / swimming in uncharted territories, and I don't think I would enjoy it all that much.

Link Laundry List

A bunch of goodies recently. I still have about 5 pages worth of links saved up, but figured it was a good time to share some of the new and the old. Rather than pounding out 10 blog posts I figured it would be easier to write a nice list of attention worthy items.

Why do Domain Auctions Partner With Sleazy Registrars?

I recently won a great domain name at an auction. Spent the money, waited a few days, and got the domain management details.

I logged into my domain management account, and searched around the site...no details on how to transfer a domain name away from their site - no transfer authorization code anywhere. The only article I found was one on ICANN rules, stating that you could email them if you needed help locking or unlocking your domain names - but nothing about auth codes.

Most of their contact policies were via email. I could not find a phone number on their site until after I submitted an email to them explaining my frustrations. Then I got sent back an email telling me to check out their help page which consisted of a Google search box. This page actually had a phone number in the upper right corner. So I called it and it told me I was the first person in line. I waited for a few more songs and got told I was first a few more times before hanging up the phone in frustration.

So then I searched for the parent corporation site and hunted around their site for a support number. That worked and was answered within about a minute. Sweet. But...

The guy who answered the phone at first denied that his registrar had anything to do with the domain name I just bought. "Someone registered that directly with Tucows," he said. I then asked why I was sent a welcome domain name management email to log in at his company's site and why I have a customer number with them. At that point he looked up the name and saw that it was registered with them, but then he told me that they had a 60 day policy on domain transfers and that I couldn't get it yet. I said to send the auth code anyway.

After telling me no a couple times he finally said ok. But then the email did not come right away, so I asked if he could just tell me the auth code. He said "no because then we could seize control of the name." I told him I thought they already did that with their website and customer service.

I finally got the auth code, and the domain name is allegedly "Pending Current Registrar Approval." I hope it goes through!

Are these shady third party registrars actually owned by the same parent companies? Couldn't the domain name auctions allow the end buyers to pay a $10 fee per secured name to avoid sending them to some outfit that wastes their time in an attempt to either steal their domain name or cash? Some of the auctions already have the house keeping some of the best inventory and shill bidding against you for what is left...why must they keep screwing you even after the relationship is over?

Does SEO Consulting Have a Future?

This is a guest post by John Hargaden from wevolution.ie, which is a follow up to our post on selling SEO consulting services.

a chip in the sugar

Try not to look like a country bug. Blend. Blend in.
- Flik, A Bug’s Life

The complexity of SEO, the forensic nature of parsing words and matching lines, is a hard sell. How do you describe it without sounding like Lou Grant, as opposed to a can-do service provider? PPC is transparent, measureable, a better market to focus on.

SEO versus PPC. Experiential versus rational processing. Intuition versus logic.

Once upon a time, there was no ‘versus’, no sound of a hair, splitting. Just SEO and PPC. Now, as the online market matures, limbs get minds of their own, and the question becomes, “Which would you prefer, working in organic search or working in PPC?” And I say, “Organic search” (because I’m trying to be cool). But I mean, “PPC” (because I need to eat).

And I also speak today, because I can’t help it, about the parallels I see in the evolution of the online marketing sector today, buffeted by a recession (petty distinctions among the econ gurus aside) as a mirror of the games development industry in 2000, buffeted by the dot com deflation.

Why Pay-Per-Click is Important

Pay-per-click marketing allows you to test in real time. Conversely, the more expensive the associated PPC ads are, the more value there is in performing SEO on a site in a paid niche.

Why Traditional SEO Consulting Tires Easily

In a frontier, we few settlers have the time and space to hold hands, to tame the beasties. With online marketing, the elastic mindshare stretches ever outwards, and how a client interacts with the media and people in their marketplace (and here I’m thinking particularly of social marketing, semantic search etc.), rapidly morphs as time delivers a consumer and producer net-literate family – we will watch our care grow surly, independent and, oddly enough (or maybe not oddly at all), conservative and risk-averse.

Oh dear.

As SEO movers and shakers, then, our assumed mantle of progenitors will, as history teaches, count for nought; it will be up to us to change. Again.

But, here’s the thing: companies and corporates, for all their twittering on about flat management structures, are hierarchical, irrespective of how big the base or how shallow the pyramid. And I mention this because, at this stage in the evolution of the search marketing industry, the internal architecture of a company cannot accommodate what is, at this moment in time, an essentially horizontal agent – the SEO analyst. You can tell that companies are caught in the headlights of oncoming online traffic, because they invariably advertise for an online marketing manager “....reporting to the Marketing Manager.”

Ah lads, get a grip.

I have faced grown marketing managers across the mahogany tables of traditional sales and marketing lairs, lilac carpets bristling with empathetic static, as their watership down eyes peer into mine, pleading with me to answer that question normally reserved for their newly-appointed, crabbid-out CEO, but now commandeered almost exclusively on the appointment of an online marketing executive, “What the hell am I supposed to do with him....?”

Empathy is a shared keyword. You hear a lot of talk about empathy. Perhaps, as an online marketer, I can admit to valuing the relationship with the Client more than the relationship with the product. Liking the Client drives motivation. I wouldn’t worry about it – it’s a growing pain.

The point is, search results – the kind that the Client wants – are predicated on future, not current, ambitions. Marketing managers, and their staff – they implement based on what’s coming down the product pipeline. The Head of Search Marketing, on the other hand, is required to be at the conception of the new ambition, before the specifications are written, at the point where the Boss wakes up in bed in a cold sweat, turns, and, leaning over his (shhh, sleeping) Corporate Body, whispers to his online acquisition principal (who, convinced that he as ‘a bit of all right’, as opposed to being, quite literally, just ‘a bit on the side,’ is patiently consuming lines of shifting search engine algorithms under a night-light livid with the colour of validation), “I think I know where this is going to next.”

Yummy.

With marketing managers, size matters; we, on the other hand, console ourselves with the thought that it’s what you do with it that counts. Traditional marketers view adrenaline as a reward; we view it as a rival for our charms. Design versus dasein. A chip in the sugar.

Which reminds me: epistemology and metaphysics, logic, semantics – we need philosophers, not technologists (whatever they are). And still we repeat the sins of our forebears, when online games recruitment banged on about quote having a passion for gaming unquote, until it copped itself on and realised that what games development needed were full sets of feet to march forward upon, not more ingrown toenails. Perhaps even we can teach the old dog new tricks.

Less self-regard, more oxygen. To paraphrase William Goldman about another all-sex, zero-foreplay industry, nobody knows everything.

Why Traditional SEO Consulting Will Persevere

Businesses that value their online objectives will be clever enough to realise that you can internalise process, you can internalise implementation, but you must outsource strategy, you must outsource training, you must outsource mentoring, you must hold your nerve, be sufficiently confident to absorb externals telling you what needs to be done – and what doesn’t. The only people I know who can provide that level of service are people who value what they have learned from their mistakes more than their successes. Scars versus skills. SEO versus PPC.

Cor. And blimey.

John HARGADEN
wevolution.ie

Selling SEO Consulting Services

Why Traditional SEO Consulting Usually Sucks

I do not like doing much traditional SEO client work, and see the business model as having limited longterm value for most SEO consultants. The best consultants could usually make more promoting their own sites and brands than they would working for clients.

  • Most prospective SEO customers are not ranked well because their businesses are unremarkable and have little to no competitive advantage. Worse yet, some of them have arbitrary constraints that hold back growth potential. In many cases it would be cheaper, easier, and more profitable building from scratch with a strong brand and domain name that was built around succeeding on the web.
  • Those who have not fully bought off on the power of SEO often end up underpaying the first time they buy services, which precludes honest consultants from working with them. After they got burned once, they want to minimize future risks, which sets off a market for lemons effect.
  • As the web gets more competitive many of the best SEO techniques are going to relate to content strategies and how a client interacts with the media and people in their marketplace...something that is a bit hard to control as an external consultant unless there is an internal team that also pushes to get it done.
  • Businesses that *really* get SEO and value SEO bring it in house.
  • The people with in house SEO teams sometimes hire 3rd party consultants, but there is a limit to what they *can* spend before their own competency is called in question.
  • Most the time clients do not want you to mention them, and if you do there is a risk that Google will edit the ROI right out of your service.

3 SEO Consulting Models That Work

If one wanted to sell search marketing services for the long haul then the best options are probably

  1. Quasi-Publisher: having an editorial position in a niche vertical (like automotive or consumer credit) where you act as both a thought leader and a promoter who monetizes through display ads, affiliate offers, and product sales. The diversity of revenue streams allows you to shift focus as desired or needed.
  2. Paid SEO Tools: some sort of tool or software product that adds incremental value to the SEO process, though this model is hard because so many people are giving away tools to gain mindshare. At the higher end this model can work for companies that get SEO but have temporary IT related roadblocks that prevent indexing, though it is hard for that to be a longterm strategy for clients because tool providers could keep hiking prices after the companies are dependant on them.
  3. In House SEO Training: some sort of training program where you help others succeed, but you offer guidance more than doing the work directly, though this model is also hard because there is so much free information, and most people do not realize the hidden cost of free.

Why I Still do Limited SEO Consulting

If it doesn't pay well relative to my other income streams, why do I still occasionally sell SEO consulting services?

  1. Projects where I feel I can learn: one of the things that attracted me to search is that it intersects with so many marketing disciplines and site aspects that it feels like I am always learning. Having a partner who is a 20 year veteran of the ad agency world that knows the algorithms better than I do makes it easy to learn something from every project.
  2. Projects where I feel I can have fun: when I was new to the market cash flow would have been a bit more of a criteria, but if client work is a pay cut (which it usually is for me) then it needs to be enjoyable.
  3. Ego and validation: I think more than most people I find a need for validation. This is still a bit of a remnant character flaw of mine that I have been quickly losing since meeting my wife. But it is cool to go to websites you know and patronise often, and see your ideas and strategies make their way into the source code and marketing.
  4. Diversity: variety is the spice of life, and if you sit and look at a computer screen far too long every day it is nice to mix up what you are doing from time to time.

When PPC is Better Than SEO

The complexity of SEO makes the barrier to entry much higher, which is why I like SEO so much from a publisher standpoint. But if you are selling consulting services PPC is a better market to focus on. Businesses using PPC spend lots of money and would look at any external help as a chance for cost savings on current spend, rather than an unknown investment or investment that had to be limited in scope for internal business reasons.

Are you still selling SEO consulting services? Do you still plan to do so in 5 years?

Automated Internal Linking on Steroids

For a while Google was against the idea of seeing search results inside of search results, calling them redundant. But over the last couple years they losened up their stance on the issue...not only do they index and rank tag pages, but they go so far as generating content pages on the fly by entering keywords into search boxes on websites.

Search and tag pages usually have some editorial input, but some community content sites (like associated content) automate the process of adding links to content through algorithms which are likely self reinforcing on rankings and revenues. eHow takes this one step further by automating the internal links and pointing them at recycled content from Dealtime, eBay, and Amazon.com...just in case you are shopping for Ice online ehow.com/shop_ice.html.

Automated internal linking will become a big SEO trend in 2008 and 2009. Jim Boykin offers an interlinking tool inside his Internet Marketing Ninjas program, which came as inspiration for Gab Goldenberg to make a free Wordpress plugin to do the same. If a site like TechCrunch installs the plugin they could basically pick any phrase and own top rankings in a week. For smaller sites they might need to partner with a circle of 20 or so friends that swapped promotional editorial links back and forth.

Search has been a driving force in lowering the value of most traditional media business models, but how useful will search be if most major publishing platforms aggressively use automated internal linking, especially if they start doing it to point links at custom advertising pages focused on high value keywords? The problem with many publishing business models is a high cost structure coupled with poor targeting. Automated internal linking fixes the targeting issue, and those ad pages would subsidize the cost of their editorial.

Update:

I am guessing that if people are too aggressive with this they could get penalized. In fact, at SMX Todd Friesen stated the following tip, attributing DaveN as the source

Because different link brokers moved from Sponsored Links to inline linking, there's now a Google filter that looks for too many new links coming from old blogs. If you have a network of 40 aged blogs, go back into the archives, add a link to the site you want knocked down across the network; you'll knock someone down.

A safer way to use the automated linking strategy is to look at data from tools like SEO Digger, ranking reports, analytics, and SEO Digger. See where you rank close to the top, and then add a few more links pointing at pages ranking for the best keywords...keep iteratively testing and make a number of smaller moves rather than automating mass shifts in PageRank, especially if you are doing automated linking cross site.

Pages