In the beginning RKGBlog was just Alan noodling around. Every once in a while he’d hector me or Larry Becker into writing something. As it gained momentum we put more energy into it, realizing that it had become a place for us to codify our beliefs about paid search and marketing in general.

We hesitated to have others at RKG write for the blog. Partly, this was because those folks actually have work to do, but mostly we were scared that exposing our talented team to the world would lead talent poachers to pick them off.

I still worry about that, but feel the benefits outweigh the risks.

You’ll note the eruption of “new” names and faces as authors at RKGBlog. Hopefully this trend will continue. Our Client Services team is, imho, the best in the business, and it’s high time we let them show their stuff. These folks are on the front lines and can offer more perspective on the fine points of search than I can. I’ll continue to pontificate, of course, but I’m optimistic that opening up the blog to our team of analysts will be good for everyone.

Enjoy the fresh perspectives, but remember: No poaching! :-)

We’re helping to kick-off the event on Monday during the Online Retail Boot Camp.  George Michie will be one of the drill sergeants at Boot Camp, discussing testing and leading a round table on The Key Paid Search Fundamentals that are most often misunderstood by marketers.

RKG will also be in the Expo Hall at Booth #743. I’ll be there along with Cady Condyles and Ryan Gibson. We’ll be offering on-the-spot ppc mini-clinics and sharing great articles and conversations on paid search.  Just like RKGblog.com, the RKG booth is your #1 source for free paid search info.

Drop us a line if you’ll be at the show and would like to meet up.

Hope to see you there!

Technorati Tags: george-michie, RKG , shop.org

In this vision, 5 or 10 years down the road, advertisers won’t have to specify keywords on which they’d like to advertise, nor would they have to pay for traffic that doesn’t convert. Advertising would be keyword free and paid for based on performance.

Sounds compelling! No keyword construction and maintenance, no worries about tying traffic to the right landing pages, no complicated bid management: Google will handle it all for you. Heck, they might dynamically write the ad copy that most resonates with each individual user! The advertiser just sits back, relaxes, and lets the good times roll.

Google would be wise to think this over carefully. Three considerations come to mind:

1. Could they really pull this off? For this to make sense, it would have to be more profitable for Google to pull all the strings than to allow advertisers to have the controls. For that to be the case Google would have to be able to do the advertising more efficiently than the advertisers do it for themselves, otherwise advertisers would not be willing to pay more for the same results. There are many reasons to question whether that’s plausible.
   • Would Google be quicker to recognize stock outages than the retailer is? For companies selling shoes, oftentimes the issue isn’t an outage as much as thinning of the most common sizes. For airlines, will Google know when certain routes are close to capacity for the likely selling window?
   • Would Google know a retailer’s shipping cut-off for Christmas delivery?
   • Would Google know when a retailer is having a promotion on certain products or across the board? Advertisers can anticipate these events and bid proactively…Google couldn’t.
   • Would Google know which products generated a great number of returns?
   • Not all orders are created equal: leads vary in quality, some keywords generate much bigger ticket orders than others, and the retailer has different margin structures built into its sale prices. Would Google allow different CPAs based on these factors? How would that work? Would Google have to know everyone’s profit margins on each product? Would they wait for leads to close to prove the value?
   • Would Google be able to pick the right landing page for each search? They don’t do this well in organic search at this point. Do a search for “nikon digital lenses“. What I see is a number of landing pages for Nikon products (not specifically lenses), and a handful of specific product pages (too deep). This hurts conversion rates. If Google generates lower conversion rates because they pick the wrong pages (could they even find search results pages?) how could they be more efficient than the advertiser?
2. Would the advertisers want this, even if Google could do it profitably?
   • For this to work, Google advertisers would all have to give Google real time conversion data. Privacy concerns aside, anyone familiar with selling through Amazon knows the legitimate business risks of sharing sales data with a mega company that could turn the tables on them.
   • Given the likelihood that Google will have to do a great deal of testing to determine what traffic to send where, and that experimentation by definition involves sending folks to the wrong place sometimes, are advertiser’s likely to be okay with the impact on their brand?
   • Anyone who works with affiliates will recognize the perils of revenue-sharing deals: does Google get paid for brand sales? How would orders that touch multiple channels be handled? What about frauds, cancels and returns?
   • The problems with revenue sharing deals go deeper than that. They create incentives to grab only the lowest hanging fruit from each orchard before moving on to the next. In this context the fruit left behind might represent the long tail: note that when Google Campaign budgets are applied, an already complex puzzle gets even more complex for Google. They simplify the problem by ignoring very specific keywords and just serve the general stuff. This hurts conversion rates. Or the fruit that gets ignored might be niche advertisers. “Too complicated to figure out which of 500 retailer’s ads work best for “Sony 60 inch TVs” — just serve ads for Best Buy, Wal-Mart, Amazon, etc and forget the little guys.”
   • Google would live in the world of revenue per impression for each ad/user search. If Google sees the same revenue per impression from multiple advertisers, they’re ambivalent as to which ads get served the highest, or make it to page one. The advertisers are decidedly not ambivalent. If Google decides Apex ads generate the same revenue as Acme ads they get to pick who wins.
3. Would Google want this to happen?
   • Given that Google might still control the lion’s share of the market 5 or 10 years from now, do you think the SEC and the DOJ might be interested in how Google decides which ads to serve? If the advertisers don’t control their own fate, it seems like Google gets to play king-maker, and that seems likely to incur the wrath of federal regulators.
   • Does Google really want to move away from being a technology company towards being a service provider? If they think they have client service issues now, wait ’til they’re controlling ad service! Yowza will they need to expand staffing!

Now, a wag will point out: “Of course RKG is against this kind of simplicity, it would cut the PPC agencies out of the loop!” Those wags are so annoying!

No question, complexity encourages outsourcing which benefits RKG. However, where there is marketing data there is a role for RKG, so we’d figure out something else to do.

What I find really troubling is Google belief that they could actually micro-manage an online economy more effectively than the players involved. There’s certainly no evidence to support the notion that Google can do PPC more efficiently than the best folks in the space. And free market economics certainly suggests that those with the greatest skin in the game certainly should be able to do it better than a disinterested machine.

Perhaps they see how badly some firms do search and think that without paying attention to the particulars, their algorithms could do better than those folks. They may be right in many cases, but I do believe that the weak agencies are being “outed” and that the bar is rising.

I’d love to hear what others think of Google’s vision!

Technorati Tags: Google monopoly

We thoroughly understand why prospective clients want to know: we all want to know in advance what the impact of a change will be on ROI. What I don’t understand is why they’d believe what we tell them.

While we can usually guarantee a prospect that we can hit their competitive search efficiency targets (unless the volume of search is too small), we can’t project what the impact will be on their top line.

If we have good sample data from them, we can often speak in detail about what their current problems are — thin keyword lists, poor bidding, bad use of match-types, poor landing page choices, whatever the case may be — and what we’d do to address those problems. We don’t know what the impact of those fixes will be. Indeed, we can’t know.

Three factors determine the size of the opportunity:

1. The Volume of Search. PPC responds to demand, it cannot create demand. The company providing bleeding edge service that no one knows you can outsource is going to have a hard time with search.
2. Relative Conversion Rates. If competitors are more effective at converting visits to sales due to selection, pricing/offers, name recognition, or site design it will be difficult to generate traffic cost effectively.
3. The Efficiency Targets. Even if a company competes well, if its competitors are willing to spend a larger percentage of their revenue on marketing than our prospect can, we will have a hard time competing for prominence.

We can’t gauge any of these factors, let alone all of them. Even if we could know all these factors historically it wouldn’t necessarily allow us to predict the future in each area. After all, how many companies out there are hitting their monthly forecasts for 2009?

Many agencies are more than happy to make bold predictions — some without even seeing any data! — but what mystifies me is that advertisers actually listen. Some agencies even tout their advanced, highly scientific, very very complex algorithm for predicting the future. Hokum. They can’t make these projections any more accurately than we can.

We’ve lost out on many RFPs because we wouldn’t predict the lift our services would create while the winning agency could predict a 73.4% increase in the top line and 22.7% increase in the bottom line, or whatever.

More than a few of those advertisers have come back to us after a year, because the other firm couldn’t deliver on their promises.

I don’t really blame the agencies for making the projections. We’ve been strong-armed into writing down a number from time to time. Because it’s so often demanded, we even kicked around the idea of building a fancy looking crystal ball calculating machine that would: take inputs, chug impressively and belch out an answer. We didn’t do it; too disingenuous for our tastes.

I do blame the advertisers for a) asking for something no one can give them; and b) actually paying attention to the responses. The axiomatic old joke:

Q: How can you tell when a salesperson is lying?
A: Her/his lips are moving.

is not too far from the truth. We try to be different, and I think we are, but why would anyone believe that?

Selecting a vendor should be based on a good match between the agency’s tools and knowledge and the advertiser’s needs. Their performance should be judged based on their reputation and careful questioning of their references. The reference calls can be very revealing. Every agency will give you references from clients who love them, the difference is whether the reference knows their stuff. Good agencies make the sharp clients happy, bad agencies make only the uninformed happy.

Choosing a vendor based on who makes the biggest promise is a recipe for disappointment.

Technorati Tags: forecasting performance, PPC projections

Contact:
Ryan Gibson
The Rimm-Kaufman Group
434-970-1010, ext. 110
ryan@rimmkaufman.com
www.rimmkaufman.com

The Rimm-Kaufman Group is once again named among Inc. Magazine’s fastest growing companies

Charlottesville, Virginia, Wednesday, August 19, 2009. For the second consecutive year, The Rimm-Kaufman Group (RKG) has been honored by Inc. Magazine as one of the fastest growing private companies in America. RKG, which appeared on last year’s list at #315, is ranked at #536 on this year’s list, which is based upon percentage revenue growth over the three year period ending 2008. RKG is ranked #52 in the Advertising & Marketing segment.

Inc. Magazine —which announces this year’s list in the September issue—has been publishing its popular Top 500 list since 1982. In 2007, it expanded the list to include the Top 5000 in order “to get a better statistical picture of the overall economy,” according to the magazine’s web site.

An official press release accompanying the list indicates that the companies included are surging in spite of the economic downturn: “Despite the ongoing recession, aggregate revenue among the companies on the list actually increased to $214 billion, up $29 billion from last year, with a median three-year growth rate of 126 percent. The Inc. 5000 are responsible for creating more than 1 million jobs since their founding, making the list perhaps the best example of the impact private, fast-growing companies can have on the economy.”

This has been the case for Rimm-Kaufman Group which continues to grow and hire new employees despite the economy’s doldrums. RKG has seen its revenues grow more than 500% since 2005 by managing the search marketing campaigns of many of the nation’s top retailers.

“Only a handful of companies make the Inc 500 two years in a row,” said George Michie, RKG co-founder and CEO. “We just missed doing so, but came awfully close. Fairly remarkable for a firm that hasn’t really pursued growth aggressively. We have two full-time sales people. We’ve done two trade show booths in our history, and we’ve bought one print ad. We’ve grown not by bringing in clients by the boatload, but by keeping the clients we catch.”

Along with emphasizing RKG’s commitment to clients as a recipe for success, Michie pointed out that a commitment to employees is just as essential. “Importantly, RKG remains a good place to work. We work hard, but we remain dedicated to protecting our employees’ family time outside of the office.”

####

For more on The Rimm-Kaufman Group please see www.rimmkaufman.com

For more on the Inc. 500 please see www.inc.com

Technorati Tags: Business, inc-magazine, RKG , SEM

“Do these folks really not understand how search works, or are they criminal enterprises that steal from their clients through lies and deception?”

However, Alan always encouraged me to “be nicer” to people and I’m trying hard to follow that advice.

There’s another explanation for poorly run campaigns that is probably both more charitable and more accurate at least in some cases: many agencies view their role differently than RKG does. Namely, they view themselves as advertising brokers.

In many respects this is the traditional relationship between advertising agencies and their clients. The agency provides creative guidance, expertise and ideas, and often negotiates placements with publishers (Print, TV, Radio, etc.). Their compensation is based on how much media they buy for their clients, with the notion that successful campaigns will be broadcast widely, lead to more ads and more media buys. The markup charged by agencies (15 – 20% of ad spend) creates incentive to develop campaigns that are a hit, and also to sell their client as much advertisement as they’re willing to buy.

As a retailer, I certainly worked with agencies that facilitated advertising, but they called themselves brokerages. We worked with List brokers, Print Ad brokers, and Package Insert/ Alternative Media brokers. We were willing to pay them their mark up to keep us from having to manage the logistics internally. However, we always knew that they weren’t really on “our side” of the table. It was a three sided table, the advertiser, the broker, and the publisher, each with their own interests. We knew that the broker would push us to buy more than made sense to us, that was their job, just as every home buyer should realize that “their” real estate agent actually works for the seller.

When Alan and I started RKG we chose a different model. We wanted our management fees to be based on the amount and quality of our work, and our relationships with our clients to be more in the vein of a partnership. We wanted to be viewed as part of their marketing team, paid fairly for our work but ultimately working as advocates for our clients’ interests.

We did accept convention in establishing a fee structure based on advertising spend, but we put caps on both the maximum and the minimum monthly fee to keep the fees in line with the amount of work we do. We didn’t invent Christmas, and while big programs do tend to require more from us than small programs, they shouldn’t scale off the charts.

Funny that from this perspective those other agencies don’t look evil, or incompetent, they just look like brokerages. Maybe my complaint with them is in not being more transparent in that regard.

As an advertiser, how do you know whether your PPC agency is more like a broker or more like your advocate?

The fee structure is one piece. Fees that scale off the charts don’t make sense in PPC. Companies that can spend lots of money cost effectively on PPC can do so primarily because of market conditions, not because of any particular brilliance of their agency. If there is a ton of search for your products, you have competitive offerings and the space is full of competition, the search volume and CPCs will create a big program whether it’s well managed or not. Revenue-sharing arrangements are no better, and are usually worse when commissions are paid for search on your trademarks.

The other tell-tale signs might come from how you answer 4 questions:

1. Have they ever suggested reducing spend?
2. Have they ever suggested not trying a new program or strategy pushed by the engines that would require you to spend more money?
3. Have they ever resisted your suggestions to spend more on the grounds that their experience suggests it would be ineffective?
4. Do they frequently push you to advertise more aggressively than makes sense to you?

No PPC agency will call themselves a brokerage, but asking the questions above of their clients might help you get the straight scoop.

Technorati Tags: paid search firms, PPC-Agencies, SEM management fees

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On Saturday July 18th our friend and founder, Alan Rimm-Kaufman, died from leukemia. For the past 16 months, Alan endured countless rounds of chemotherapy and a bone-marrow transplant in hopes of finding a cure. Alan was 41. He is survived by his wife, and two young children.

We are deeply saddened by this loss. Alan was a man of integrity, intelligence, and humility, which he combined with nearly boundless energy and a joy of life few can match. We will miss his exuberance and his tremendous generosity of spirit.

The Rimm-Kaufman Group remains a strong and vibrant company. We remain committed to providing both thought-leadership in the industry and peerless results for our clients. Like any good leader, Alan built this team to be stronger than any individual member. Our growth and continuing success during his 16-month absence is a tribute not only to his vision, but also to our well-established shared vision for the company.

In lieu of flowers, the family requests that donations be made to the Alan Rimm-Kaufman Legacy Fund, CBI Preschool, 301 East Jefferson Street, Charlottesville, VA, 22902. Donations may be made online at CBI Preschool’s website. We hope also that individuals will consider regular blood donations and will join the national bone marrow registry at www.marrow.org.

The outpouring of support we’ve received this morning has been almost overwhelming. A real tribute to Alan that clients, friends, competitors and some folks who only met him once or twice nevertheless felt a strong connection to him.

The folks at Shop.org, Internet Retailer and Search Engine Land all wanted to run tribute pieces to Alan, so we thought we’d simply ask folks who knew Alan to submit their remembrances as comments to this post.

Thank you for keeping Alan’s family in your thoughts. We are all grieving right now, but in the days ahead we will realize how fortunate we were to have had Alan in our lives.

For the past 8 months RKG has reported on Year-Over-Year performance trends among our retail client base. For consistency we’ve studied the same group of 20+ companies who’ve been with us for more than two years and who spend significant amounts of money on PPC.

It’s important to note that the clients we study do not budget for search. Rather, we are given efficiency targets and tasked with spending as much as we can within those targets. Hence increases and decreases in spending are primarily tied to consumer behavior. As conversion rates and average order sizes increase we can spend more, as they fall we’re forced to spend less to hit the targets.

As we see the numbers, May represents the first real Year-Over-Year gain in quite some time. The median was a 10% lift in sales YOY. Folks ask us: “Do you have any clients that are (up significantly, down, down significantly, etc)?” to which the answer is “yes”. The standard deviation on the 10% growth is something like 40% and depends tremendously on the vertical.

Perhaps a more stable benchmark is “What fraction of the study group is up year over year?” Let’s look at those trends over the last 10 months:

Surprisingly, much of this growth has been fueled by rebounding Average Order Sizes. Traffic volume and Conversion rates remain weak.

A pessimist might suggest that this is a Mother’s Day phenomena. “Mom, we can’t afford to come see you this year, so we’re sending you a nicer than normal gift…”

We hope that it is emblematic of a recovery underway.

Anyone else care to share what they see?

Technorati Tags: online retail benchmarks, PPC-Benchmarks, Year over year performance

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The Search Marketing Expo team will be hosting their 2009 SMX Advanced show June 2-3 at the Bell Harbor International Conference Center in Seattle, Washington. I’ll be heading out to Seattle to talk paid search at the show.

The show is designed for the experienced search marketer- focusing mostly on advanced tactics while providing little background for those not familiar with the search.

This year, there’s some added buzz around the show, as a possible debut for Microsoft’s Bing has been rumored.

I’m looking forward to the show and the networking that it brings. Want to connect at the show?

On Tuesday, June 2, join us as we’re chatting paid search at the PPC Birds-of-a-Feather lunch table.

On Wednesday, June 3, be sure to check out Proving & Improving ROI in Paid Search. We’ll be discussing methods for proving what paid search is returning for your investment, as well as presenting ways to get even more ROI out of your campaigns. We’ll be covering topics including data warehousing, lifetime value, marginal return, cross channel attribution, advanced bidding tactics, and more.

Hope to see you there!

Technorati Tags: Danny-Sullivan, marketing-conference, SMX

Andrew Goodman’s recent SEL Post dividing the world of PPC practitioners into “Muddy Ones” and “Quants” was quite entertaining and accurately characterizes most firms in the space. We at RKG like to think of ourselves as “Muddy Quants” in Andrew’s vernacular. Alan has the PhD in Stats, and…well…I’m muddy.

We believe that for large, competitive, ROI driven accounts you must have both pieces. You need an advanced system to predicatively model data and execute bid changes automatically, because hand-bidding off of spreadsheets simply doesn’t compete in 2009. At the same time, we know enough about numbers to recognize the limitations of the data and the need for human ‘intervention’ and control of the process. The predictive model has no way of knowing that there’s a sale next week on Gibson Guitars or anticipating how that might impact performance; it has no way of knowing that you’re out of Merrill boots sizes 9-11; or that a retailer has just gotten some co-op advertising dollars from Kohler; or that customers of certain types of products are much more likely to pick up the phone and call or visit the local store than the average spillover rate would suggest. Marketing is muddy, no matter how skilled one is at analysis.

But not every advertiser is both ROI driven and competing a large, complex marketplace.

How does your company think about advertising/marketing? Is the primary goal of PPC advertising to:

1. Create positive awareness of your brand?

or

2. Generate maximum revenue within some acceptable ROI?

Many will answer “both”, but in our experience only one of these dominates an advertiser’s thought process.

Agencies come with the same biases: either they’re fundamentally direct marketers and live and die by ROI calculations; or, they’re advertising agencies that focus on share of voice, brand awareness and creating positive experiences with your brand.

If the principal objective is branding, you don’t need the mathematicians/engineers, and likely you don’t want them. When you ask “What sort of ‘outside the box’ ideas do you have for creating brand awareness?” the quants will scratch their heads and send you a spreadsheet pointing out why the changes you suggest would damage conversion rates, lowering revenue per click forcing bids down the page. Not what you wanted to hear, and, frankly you’re asking number crunchers to paint a portrait.

If, like our clients, you enjoy talking about hold-out tests, the incrementality of a marketing program, lifts necessary for offers to pay-off, and the cannibalization that occurs between different marketing programs, you will be miserable if you hire the advertising agency style of PPC firm. They will talk about metrics that don’t matter to you like impression share, they will talk about buying cycles without supporting data, and most importantly the results will stink. At a gathering of agency heads I heard one say “(egads) Our clients are starting to ask us to separate brand from non-brand performance data, and (horror of horrors) some are even asking for keyword level performance data!?!” I almost fainted! (As Direct Marketers, RKG has been providing that data to clients since our inception, and indeed encouraging them to think through the consequences of overspending for branding purposes.)

Agencies often claim expertise in both, but take a look at their “about us” page to see their roots. The roots will determine the type of tree. Those who aren’t direct marketers by training do not build the right analytical systems, the data warehouses, or the algorithms and don’t train their staff to eat, breath and sleep ROI.

Advanced data modeling doesn’t help every company that seeks ROI.

Data modeling requires data. If an advertiser’s niche is too narrow in scope or geography, the best mathematicians in the world won’t be able to materially outperform the advertiser’s own staff. An agency of muddy-ones will do every bit as well as the muddy-quants like RKG, and probably better than the algo-only firms.

Finding the right PPC agency for your firm requires knowing yourself and whether your organization sees PPC as primarily an advertising vehicle, or primarily a direct marketing vehicle, and finding an agency that shares the same view.

Technorati Tags: PPC-Agencies, SEM RFP

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