• My buddies over at Prospect MX made a cool link building chart.
• Great article about the rapid rise and fall of Geosign.
• Rae on why you can't just rely on content quality to do your marketing for you.
• Search Engine Strategies running a series of advertorial only sessions. Eeek.
• Wired considered it spamming when Search Engine Land mentioned that people can submit articles to the Wired How-to Wiki. That same Wired now offers a guide on how to 'Google Bomb' an Enemy. For those scoring at home, Wired does not really care about spam...they just want controversy and pageviews.
• Why Google's surprising paid click data are less surprising - insightful article by comScore about how Google is intentionally monetizing fewer search results.

As free and infinite competition erodes the value of weak connections, a key to sustainably selling art is to reach out to 1,000 true fans:

The key challenge is that you have to maintain direct contact with your 1,000 True Fans. They are giving you their support directly. Maybe they come to your house concerts, or they are buying your DVDs from your website, or they order your prints from Pictopia. As much as possible you retain the full amount of their support. You also benefit from the direct feedback and love.

Seth mentioned how Bruce Springsteen built true fans over the years.

Even if you currently do not view yourself as an artist, to still be selling information online in 5 years, you will need to become one. Last September I posted Publishers Will Become Interactive Media Artists, which explains the shift that is taking place.

Recent University of Iowa research concluded that blissfully ignorant shoppers are happier with their choices:

"We found that once people commit to buying or consuming something, there's a kind of wishful thinking that happens and they want to like what they've bought," said assistant professor of marketing Dhananjay Nayakankuppam. "The less you know about a product, the easier it is to engage in wishful thinking. But the more information you have, the harder it is to kid yourself. This can be contrasted with what happens before taking any action when people are trying to be accurate and would prefer getting more information to less."

Which is worth thinking about when you aim to sell something. Sometimes the mystery is part of the appeal. Sure you want to answer many common questions to aid the perception of value, but sometimes a vague answer that allows wishful thinking to wonder is better than concrete answers that kill the imagination.

One of the things that holds back many semi-successful people who do not fully appreciate their own value is trying to answer everything possibly before the sale, which focuses too much time and effort on non-customers, while killing the imagination of legitimate prospects.

Update: In the comments NickB mentioned this TED talks video by Dan Gilbert.

• He highlights that unlimited choice, excessive fear, and unrestrained ambition kill happiness.
• We often vote against happiness because we think that given more choices and more time to debate our options we will like the outcome more. For most trivial matters the opposite is typically true.
• Another interesting tidbit is that amnesiacs who did not remember what specific gift they were given liked it more after they were given it (even if they did not remember that they owned it).

Watch this video...it's great stuff.

The Federal Reserve is somewhat like a market maker, or at the very least a market influence, on the value of currency. Google acts in a similar value, placing value on and evaluating the value of information and collections of information.

Reading this blog post about Ben Bernanke and replace words like credit and inflation with paid links and search spam and you can see (and perhaps even respect) how Google manipulates the press, why Google's guidelines are often forced to be removed from reality, and search engineer editorial action is often harsh beyond reason.

Here is an excerpt from the blog post about Ben Bernanke:

The last time a slowing economy failed to moderate prices was the 1970s. Even as the economy slid into recession, we had major spikes in the prices of energy, food, clothing.

What is particularly worrisome to me is that as we have slashed interest rates 225 basis points, consumer loans -- mortgages and revolving credit -- have actually moved higher.

Gentleman, this is a major problem. And our internal, non-public projections forecast it is only going to get worse for the next 4 quarters . . .

Paying a PR firm is not much different than buying PageRank, other than it perceived by Google as being cleaner.

And if you are big into economic stuff here is some more good stuff...

First, Warren Buffet's Berkshire Hathaway Annual Report [PDF] offers a lot of great business strategies and insights. If you have never read any of his letters, make sure to read from the heading on page 5 or 6 about Business - The Great, the Good and the Gruesome right on through to the end of that section a couple pages later. You can also read Warren's older reports here.

Nouriel Roubini on The Current U.S. Recession & the Risk of Systemic Financial Crisis [PDF] offers a bearish outlook on housing:

This is the worst housing recession in US history, and there is no sign it will bottom out any time soon. At this point it is clear that US home prices will fall between 20% and 30% from their bubbly peak, that would wipe out between $4 trillion and $6 trillion of household wealth. While the subprime meltdown is likely to cause about 2.2 million foreclosures, a 30% fall in home values would imply that over 10 million households would have negative equity in their homes and would have a big incentive to use "jingle mail" (i.e. default, put the home keys in an envelope and send it to their mortgage bank).

Some of the early lending institution losses are being socialized by inflation and other sources

Countrywide - an institution that was more likely insolvent than illiquid - has been bailed out with public money via a $55 billion loan from the FHLB system, a semi-public system of funding of mortgage lenders.

And this is altering the online economy heavily.

• CountryWide cut their online display ad budget by ~ 60% from December to January.
• LendingTree swung to an operating loss of $508.1 million in the fourth quarter. In early February LendingTree killed many of their affiliate relationships. Affiliates should be a low risk channel, so how healthy can their other ad channels be?

A few years ago credit card companies rewrote the bankruptcy laws, but mortgages have not yet been re-written to favor corporate interests. Nouriel Roubini highlights further risks associated with house price depreciation:

What is happening is just the consequences of rational economic behavior. In most US states mortgages are non-recourse loans; thus, if a home owner defaults on its mortgage then banks take over the collateral - the home - via foreclosure but once that happens it cannot go after the borrower for any difference between the value of the original mortgage and the current value of the property.

The Disadvantages of Low End Outsourcing

My History of Outsourcing

Last year I lost thousands of dollars multiple times outsourcing projects to people who could "do them no problem" until time for showing the results came in, and that capital was simply wasted. At the lower end, where people will take your money and do nothing for you or offer services not worth paying for, there will always be a market where people are glad to take your money.

That piece of the market creates a market for lemons effect, be it SEO, web design, programming, eBay listings, whatever.

The Cost Advantage of Outsourcing is Quickly Eroding

Not only is there a market for lemons effect, but the cost savings advantage is quickly eroding:

The reality is that wages are rising in India. The cost advantage for offshoring to India used to be at least 1:6. Today, it is at best 1:3. Attrition is scary.

Jobs that are low value-added and easily automatable should and will disappear over the next decade.

That means that if you provide a high value service, there is a greater presumed risk to hiring you, unless you have great brand strength and/or enjoy valuable personal recommendations. Worse yet, if the job is easy to automate eventually a computer will do it.

The Problem With Most Outsourcing Projects

Many people who look to outsource have a marginal business model and are outsourcing rather than improving their business model, in a last ditch attempt to try to keep it surviving after the business model is already in decay, without changing their business model to fit the current marketplace.

High End Business Process Outsourcing

You Can't Outsource Loyalty

At the other end of the market, some of the most talented people are also so ambitious that loyalty or output is limited. When I decided to change the SEO Book business model about 6 months ago I started working with one of the best programmers I have ever met. He did great work and started off faster than lightning, but he wanted to grow his revenues so fast and was so overwhelmed with work that he had a hard time making time for my project. In spite of me sometimes paying him 250% of his original rate, he and I both decided that it would be best if I finished the project with someone else. So then I ended up spending thousands more to have some re-learn some of the stuff he did, and then create custom coding to

• verify the affiliate program would work and give the proper affiliate credit while changing the tracking method
• cross reference account status and permissions across 3 databases
• integrate it all with Paypal subscription data

There are still a couple things with the site that I really need to improve (Drupal FlashVideo conversion and some stuff with the Autoresponder module), and that does not even include additional features I want to add. The second programmer is helping with some of it, I am doing some of it, and a third programmer is helping with some of it.

Freelancing to Pro: Training Your Workforce for Better Jobs

I outsourced the writing of one of my sites to a person who was passionate about the field. I let them be associated with the brand and put their name on it so they would be more passionate about building it up.

I have marketed the site quite aggressively and gave them my ideas for how to create featured content and what topics to write about. That has lead to them getting so much exposure that other people are offering them higher paying jobs.

There is an aspect of outsourcing where if you teach them enough and give them enough exposure they end up being worth more than you can pay them unless you already have a market leading channel.

When Outsourcing Works Great

Pre-made & Self Serve Software Packages & Services

• Most hosting companies are quite reliable because their business demands it. YouTube is quite reliable for hosting bandwidth intensive videos
• Payment processors like Paypal tend to be quite reliable.
• software packages like SendStudio, iDevAffiliate, and Vbulletin (they have a large enough customer base to provide a best of breed product)
• Collaboration tools and software as a service like Google Docs
• freeware like Xenu Link Sleuth
• open source software like Firefox, Drupal, Wordpress, and OpenAds (though you may need to hire someone for customization)
• Ad networks like AdWords and AdSense
• competitive intelligence tools
• affiliate marketing programs allows advertisers to tap new channels with limited risk
• simple utilities that help convert a template to a Wordpress theme like Themespress (though even that might require some tweaking)
• HTML code creation and improvement services like PSD2HTML

All the above models work so well because they

• allow a single piece of work to be sold many times
• use the feedback of many customers to improve the product

Word of Mouth Recommendations

• All my hosting providers that I recommend were recommended to me by other online friends.
• I have a guy who makes banners for me who is fast and does great work. He was recommended by a fellow SEO.
• My designer for this site and other sites came as a recommendation from other friends.
• Most of my other custom service providers are people who read this site, learned to trust me, and built a relationship from there.

My wife and I have only bought outsourced services via word of mouth recommendation that I ended up regretting on 2 occasions. In both cases, the person giving the word of mouth marketing was recommending themselves. Other than that, I have rarely had a bad experience with word of mouth marketing. And I think this is true for two reasons

• you first learn to trust the source, and they earn that trust over months and years
• then you trust what they recommend

Spreading that risk out over stages lowers the chances of making a bad choice.

How to Continue to Profit as an Outsourced Service Provider

Seth mentioned this Gavin Potter quote a couple days ago

The 20th century was about sorting out supply, the 21st is going to be about sorting out demand.

As the cost advantage of outsourcing disappears, the web gets polluted with scams, the web gets saturated with competitors, and more offline conversations influence online transactions, it seems the best ways to make money outsourcing are:

• work to build some of your own projects so you are not reliant on clients
• specialize on a niche and own the idea
• build a brand that demands market leading rates
• give away a lot of value free to do your marketing for you and qualify your prospects
• inspire customers and ensure you offer a remarkable valuable service worthy of word of mouth marketing
• turn your service into a product that is sold as a service, and include customer interaction touch-points where it makes sense to add value