Why did online search advertising grow by 27% to over 7B$ ?

When any ad spend goes up by 27% at a six month value of 7.28 B $ marketers , supply chain  and innovation folks need to take notice. Is it because everyone has stopped watching TV?  No it is because on-line search is perhaps the only advertising method where you pay when someone sees (clicks) on your ad. Not so for all other media, you pay for putting out a30 second spot on TV during the Superbowl, pay for a billboard or a magazine ad. No guarantees that anyone in the target market actually saw your ad. In fact, come February and you'll see a whole bunch of discussion about which Superbowl ad was remembered and where the product was actually forgotten!

Here are the top three things driving search advertising growth:

  1. Advertising expenses and results can be tracked: In the current slow economy this is absolutely huge as every dollar spent must be accounted for results. As John Wanamaker said about a hundred years ago   "Half the money I spend on advertising is wasted; the trouble is I don't know which half." Not so in search advertising, you do not pay for views or impressions but you pay for clicks and if you have good landing pages that take the searcher to conversion – you have a tangible result to show for the click that you paid for.
  2. When you search – well you are searching! When you search the Internet you are serious about whatever you are searching for. All other media advertising operates on the principle of "which kind of people" might be seeing this TV show, pass by that billboard or read that magazine with a whole lot of uncertainty as to who really sees your ad. On the other hand when you search on Google,Yahoo or Bing you see ads on the side panel or top panel that are paid search ads. Sometimes you'll click on the ads and the advertiser pays only when you click.
  3. What happens after you click? After you click you land on a "landing page" and that page must convince your prospect or Internet searcher that you will be able to provide what he/she is looking for.The better your "post-click" management of the lead the better your quality score on for eg. Google and cheaper your ad. A sort-of virtual sales force automation.

So search advertising can get a prospect to your door – what sales folks like to call a "hot" lead. But converting the customer needs a deep understanding of your customer,industry and competition. Contact StratoServe.

Google is a teenager at 13 and the largest free searchable database of the world

Today Google turned 13 and is just a teenager as a concept- the potential of which we do not fully comprehend despite Google explaining it's philosophy  pretty clearly.

No matter what your question, today Google has search results that are relevant to you. How does Google do that- so well and so quickly ? Well by matching the supply side of information to the search needs of the individual searcher. Here's a simplistic view of the Google approach:

  • Supply side of information: So long as the information is on the web sooner or later a Google bot will collect,categorize and rank that information for it's content,credibility and accuracy. This information includes news, maps,videos,images,scholarly articles or whatever. Once the information is properly catalogued, it's only a question of pulling it out- when asked.
  • Demand or search side of information: Since Google dominates the search market it has a great understanding of what you are searching for. If you are a Google user try searching for something on different computers and somehow you'll like your search results better from your own machine. And this is after the geotargeting of search. In other words from the same location – your own computer will give you search results that seem to make you happier !

Matching the demand for information to things that have been well catalogued and getting you the information quickly- is the magic of Google. Something that is already changing the face of supply chain and marketing at the enterprise level.

When asked, an experienced  supply chain manager, who had used paper industrial buying guides indicated that such guides were just too difficult to search. So Google was her option. How unfair ! responded the industrial supplier because our website just does not show up on the first page of search ! Well that's where search advertising like Google AdWords  or Yahoo and Bing  search comes in- as it's really useful to be seen when a buyer is searching.

 Happy Birthday Google!

The 16$ muffin and understanding B2G and B2B buying and payment processes

The 16$ muffin has outraged  Americans given that you can get a fairly decent muffin for about $2. In fact, Senator  Chuck Grassley has asked for "heads to roll"  and BBC has run a story of how impossible it is to come up with a$16 muffin.

Given the B2B and also B2G focus of this blog we  tried to find the  US-DOJ audit report. This is a PDF file and you can search the word "muffins" which appears 15 times and the $16 appears seven times in the report but is not really answered in the replies to the audit questions. Now with all the media attention some government buyers will have to face  what looks like a lot of trouble ,when the the real question is about the B2G  and B2B buying and payment process.

There are specific guidelines for refreshments including muffins on page 64 of the 2011 USDOJ financial guide. Forbes is quoting Hilton at Washington which hosted the 2009 conference  in saying:

" In Washington, the contracted breakfast included fresh fruit, coffee, juice, muffins, tax and gratuity, for an inclusive price of $16 per person," Hilton Worldwide said in a statement.

Dining receipts are often abbreviated and do not reflect the full pre-contracted menu and service provided, as is the case with recent media reports of breakfast items approved for some government meetings," Hilton Worldwide's statement added.

The auditors meanwhile are staying with their findings according to the same Forbes report. 

Here are three things to learn for both marketers and supply chain folks:

  1. Buyer: Make the contract terms clear at the point of signing. Mention all what is being bought,what is free etc.
  2. Marketer: You are setting up the contract but invoicing is important so your people must reference the contract, even if they are abbreviating the invoice.
  3. Buyer/Marketer: Insist on good payment documentation or at least proper references to the order.  Remember the accounts payable person is sometimes under a time deadline to ensure that payments reach vendors in time or as contracted. Sounds unglamorous but necessary because auditors go by documents and different people may be involved in documenting the delivery than those who contract. 

The 16$ muffin story will continue to develop  as  what the LA times calls the "joyful indignation"   of the public  shows no signs of abating.

Diffusion of discontent: Why Netflix lost only 4% customers but about 20% share value

Diffusion of innovation used to be a slow phenomenon on the positive side (seen from the organization's point of view- hey the market and product awareness is growing) till you had the Internet and social media. On the flip side of diffusion of innovation is the phenomena of diffusion of discontent which probably explains why investors lost such a lot of confidence on the Netflix stock. About 20% share value loss on Thursday vs. only 4 % customer loss due to price protests.

Diffusion of discontent has become pretty disproportionate today. One unhappy customer reports a bad dinner at a restaurant on Yelp and suddenly some more people who were peeved with your restaurant service wake up and start "contributing" their horror stories. If you are the restaurant owner you find yourself suddenly facing desolate tables. Same thing with product recalls, and price protests as in the case of an otherwise great brand Netflix ( see an earlier Netflix post here).

So what does an organization do to deal with diffusion of discontent?

  • Treat customer discontent very very seriously. Because it can spread real fast to investors and the general public who may or may not be your customers.
    • Apologise to customers fast and fix what you need to fix. How fast is fast? In the age of social media it's probably within hours or at least before the stock exchange opens. Service recovery must be super fast.

Now Netflix has apologized and is talking about splitting the digital distribution and DVD business distribution. The overall damage to the Netflix brand and stock  may take a while to fix – so powerful is this diffusion of discontent.

Internet search is serious stuff:why Google Flight Search will be a great travel distributor

When you are searching on the Internet,for anything, you are in a serious mood. In advertising and psychology theory this is called the central route to persuasion part of the Elaboration Likelihood Model. You are thinking much more about whatever you are searching compared to watching an Ad on TV, which does'nt get you to think too much and persuades through the emotional route. You are sort of "suckered in" to buying something as you are not thinking – hence the term "idiot box"  for the television set.

According to PEW Research searching on the Internet  in the US  has risen from 52% in 2002 to 72% in 2011. Email has risen from 55% to 70% while social media starting out at 11% in 2004 has jumped to 65% in 2011. Meanwhile the US Internet user population has grown massively.

When you search on the Internet – you are more serious than when you are on social media. And flight search is serious business. Currentyl because of industry relationships and embedded knowledge Kayak is better off right now , but guess what- Google does not compete with Kayak and might be able to send you to the Kayak website if they have a better deal.

Google understands search and what its search audience is looking for.This is a huge advantage from the travel industry's point of view- someone is looking for what travel related stuff people are searching for. See on left another video from Google about the rationale for ITA acquision. Consumers, I guess are getting used to this "giving up" of privacy given the huge benefits.

By really knowing their searching audience requirement Google Flight Search will be able to do a great job of linking the travel industry , including niche small travel agents who specialize in something. As this new "distribution" becomes more effective, obviously there will be ad revenue for Google from websites like Kayak,Expedia or Travelocity and even smaller travel websites. A great innovation in digital distribution of travel services if you look from the travel industry perspective.

Post-911: Innovation,B2B Marketing and Supply Chain have gone global

The ten years since 911 has made America much more globalized than ever before. Today you are likely to see some international news in every TV news program as a  discernible increase in the global nature of food in food courts across America!  Here is how innovation,B2B marketing and the supply chain have gone global:

  1. Innovation : Innovation has definitely gone global. Today major companies like GE are inventing low cost medical devices in the developing countries simply because the high cost western solutions are not affordable in poorer countries. And the amazing thing is that these innovations are being brought back to the western markets because in sectors like health-care costs are spiralling out of control.
  2. B2B Marketing: Pre-911 , the US economy was much stronger and no one really cared about the market opportunities in growth markets.Today there is a marked change so much so that  in the last Thursday Obama jobs speech specific Korean brands of cars was mentioned (Kia,Hyundai) alongwith the need for South Korea to allow GM , Chrysler and Ford to sell more of their their cars in South  Korea.
  3. Supply Chain: The Supply chain had started globalizing  since the Internet in the late 1990's. Despite security,visa annoyances of International travel there has been a huge globalization of products and services worldwide. Any segment of the new product development process can be  globally outsourced – particularly the middle parts of  concept testing ( like clinical trials) or product development (like engineering drawings and prototypes).

Thus, globalization of the USA seems to sum up the ten years since 911 – even though the survivors of 911 and the world will never be able to forget the senseless and sad events of 911.

America Invents Act 2011 to become law next week: how it might create jobs

President Obama's  jobs speech of Thursday signalled the massive reform of US patent law to spur innovation and jobs. It's intriguing  that lots of main stream media is criticizing the law given that it was passed in a bipartisan fashion (for a change 89 for and 9 against in the Senate). The mere fact of such huge bipartisan support (see text of America Invents Act 2011 here) means that it's useful to figure out how exactly the new law will work – at least ideally- and how it might create jobs:

  1. How does innovation create jobs ? :  Here is a popular older post on the music industry and the summary from the new law about job creation. Innovation or ideas of themselves sound cool but do not create jobs. Search any idea on Google or Yahoo and you'll find hundreds of pages of ideas in the form of blogs,forum opinions,websites etc. Go to Google Scholar and look at again many pages of serious academic work that are all potentially patentable i.e. they are new because if they were not  academics will not let them get published through the peer-review process. Despite these "new" ideas the problem is that ideas are difficult to commercialize,build a revenue stream unless you have the rest of the "operating" organizations abilities. You might have the most divine recipe for cookies from your grandma but putting them out large scale needs a cookie company who is able to organize the ingredients (supply chain for sugar, flour,packaging etc.) the production including large stainless mixing vats, ovens and the huge amount of marketing and distribution.
  2. Large operating companies are necessary: Large companies that are able to manufacture and put the idea to market are necessary. And they are willing to pay big money for patents. Recall the recent Motorola acquisition by Google.
  3. First to invent or first to file: In the US the earlier law was in favor of first to invent. So an entrepreneur might be able to invent something and someone else might patent first.  Now a big company might buy the patent only to face later legal challenge. A bit like buying a house or car and then discovering that a bank or lender comes up with a claim. That is why in house purchases you need to buy title insurance. Till now companies had no way of buying title insurance when buying a patent from an inventer. The new law will give ownership to the "first to file". So when a big company buys a patent from a small company who are much better at inventing stuff, they will know that other claimants to the patent will not emerge later when millions have been spent on manufacturing.advertising and marketing.

There will be the usual implementation issues with the new law. Perhaps patent attorneys will come up with online patent filing software at very low cost for inventors and the USPTO will come up with faster online processing of applications. In any case companies who already have a market will feel more confident of acquiring "clear title" patents. Since inventors are looking for markets and do not necessarily want to get into the cookie making (or rather sausage making) innovation should get spurred as the patent filing process becomes more digital and less expensive.

Once a big pharmaceutical company( like Eli Lilly) buys a patent with serious money from a start-up biotech, they are more likely to create a new product line enabling employment across the supply chain.

Disclaimer:  This blogger is not a  patent attorney and the post above is not intended to be legal advice.

Competing in a knowledge economy: Thomas Friedman on Innovation -but how ?

Friedman's new book with Mandelbaum extols Americans  to innovate at every level to get back to the growth and prosperity path. The question is how?

Every one is in a "locked" in mode – locked in to the supply chain and distribution channel and of course to the production process."Lockedin"worked till about the late 1990's when the world became hyper-connected with the Internet.  Friedman makes the interesting point at another interview  that his book "The World is Flat" in 2004 did not have any mention of social media like Facebook in the index. Today if something (anything) does not have a Facebook page- it is considered pretty unusual.

Let me explain the "locked-in" problem and how debilitating it is for innovation. In the last century the modern factory was all about systems,processes,six-sigma,lean. You had to work off the same technology platform like the music casette till Steve Jobs came up with the iPod and everyone in the cassette industry got extinct. Except now the iPod or for that matter iPad is entirely manufactured in China because the factory and processes are straightforward  and documented and Chinese factories  can do it much cheaper.And the trouble is that without the factory it is hard for even the most innovative American to quickly try out the next generation iPad.

But can the inventive American get a prototype quickly made overseas and tested in another global market and/or within the US ?  Yes because ten years after the sad events of 911, the average American is far more globalized than ever before. And there is no dearth of the entrepreneural spirit.

But  the American student and entrepreneur needs to get the basic domain knowledge…for domain knowledge is the building block of innovation in the global knowledge economy.  More after  President Obama's jobs speech tomorrow.

Just stopping AT&T and the T-Mobile merger is not enough-US cell phone industry needs to change and become an engine of economic growth

The US cell phone needs to change and become an engine of economic growth. Merely stopping AT&T and the T-Mobile merger is not enough. The industry needs total overhaul and I am saying this from a recent visit to India where the cell phone is changing the economy as the motor car changed the economy in the US in post war years. And that was the bricks economy so cars worked. To really plug and play in the global high tech click economy the US cell phone Industry must:

1. Make incoming calls free. By doing so communication will improve in the family, community and ultimately business.  India has  free incoming calls and you just give a missed call .. The equivalent of a facebook poke. And things start moving …. free to both parties.

2.Free incoming and privacy. Ask colleagues and they'll tell you that it's not calls that they object to but it is the very long times you are expected culturally in the US to talk on the phone. Perhaps making first 3 minutes free for the caller will jump-start the economy and not be such a time  and money  killer for the receiver of the call. 

3. Ban 2 year contracts – sell unlocked phones. Do you know that you cannot use an iPhone from AT&T at Verizon or vice versa? In fact you cannot use a US phone with a SIM card overseas and there is a whole bunch of advice on how/why  to Jail Break an iPhone. Now the US business starts paying over  2 $ a minute on global roaming and stops receiving calls overseas except from the most interested business contacts. And we expect  US  businesses to compete globally !

The shrinking US cell phone industry including the recent Verizon labor troubles is not good for the either the cell phone industry,US business, employment or labor.

Something to think over, while  this blog wishes   a great labor day weekend  to  blog readers.

Will Alan Krueger be able to help with the immediate employment problem?

Alan Krueger has been named to the top job of Chairing the Council of Economic Advisers. Compared to his predecessors Krueger is a far more influential academic. Influence being measured by the number of times Alan Krueger's work is cited in the academic world. To have an entire first page of Google Scholar in excess of one thousand citations each is a remarkable feat in any discipline. What this means is that Alan Kruegers' ideas resonate with a variety of academics who might agree or disagree with him – but do consider him impactful. Here are some of the key highly cited paper ideas  that might help with the immediate employment problem in the US:

  • Computing inequality: Have Computers changed the Labor Market?  Doesn't sound like a huge revelation except when you notice that the paper was published in 1998 and must have been in the works for several years prior. And that was in the early days of the Internet. That college graduates got jobs and better pay is one thought but that  skills and knowledge upgrades have been higher in industries that adopted computers  is a nice foresight from the 1990's.

And therein is the challenge for Alan Krueger. How do you get employers to hire folks who may not have the skills that companies need? In some cases skills might take years to acquire but are there mechanisms (like training tax breaks for companies) to motivate companies to hire and train their people on the job? How do you get the unemployed a job so that there is that thresh-hold happiness.

More importantly, how do you get everyone on the same page like the planning for Hurricane Irene? For dealing with the unemployment problem is not less urgent than trying to restore electricity in millions of homes without power post hurricane Irene.

Best of luck to Alan Krueger on this huge challenge.