Is Online Advertising Just Good for Direct Response?

Seth Godin notes that easily-analyzed, numbers-driven direct response ads are the dominant form of online ads, which has some negative side effects. But a Vizu survey indicates that advertisers will spend more online dollars on branding than direct response in the coming year.

What gives? First, there’s sampling: Vizu surveyed agencies and brands—of course those groups are going to spend more on brand ads than average. Plus, advertiser size matters. Smaller advertisers tend to ignore branding (when small businesses run ads that aren’t metrics-driven, they’re usually banner ads—written, produced, and starring the company owner, and done in one take on a cheap recording device).

But Vizu is directionally correct: branded ads are growing. One major reason: the web lets people take a direct-response approach to banner ads. Rather than run an ad and hope for some ephemeral change in brand perception, advertisers can run an ad and then check social media sentiment indicators or search engine suggestions to immediately see the effect. Scale is the enemy of direct response, but the friend of the brand-driven advertiser. (All else being equal, that means a shift in marginal ad dollars from Google to Facebook. Twitter is an open question: they’re pursuing direct-response, even though brands love them.)

SEO Agency Pricing Data

SEOMoz has a comprehensive survey of agency pricing and pricing models. The most interesting datapoint is that SEO agencies tend to work with small businesses. At a small enough scale, SEO isn’t economical; at a sufficiently large scale, it tends to happen in-house. Since agencies are so hard to scale, they’re under constant pressure as more of what they do gets banned by search engines or turned into a product by competitors.

Facebook Updates

Market Forces Updates

Paul Graham claims that one of the best investment opportunities shows up when technology makes it possible to create a market where there wasn’t one before. AirBNB’s billion-dollar valuation is a good data point. And Chris Dixon agrees that maximizing capacity utilization is a good goal for startups. Here are some new contenders in that area:

  • BodyShop has just raised $1mm to subject auto repair gigs to open, online-based bidding.
  • PartmyHouse has created a market for parking spaces; they’ve just launched in the US.

Digital Beats Physical

Digital music sales are now larger than physical sales. But given the higher frictional cost of distributing physical music, it’s safe to say that digital music has been more significant for far longer. This is another illustration of the general point that the way industries are measured tends to exaggerate the importance of the incumbent: by the time Google was beating portals on “eyeballs” and not just searches, the game was already over.

Groupon Tracks Customer Satisfaction

One way to understand Groupon is that they’re now focused on making the business as good in practice as it is in theory. Last month, that meant letting customers book specific time slots rather than undifferentiated appointments. Now, they’re letting business owners track customer satisfaction from their deals. One at a time, Groupon is dealing with the “but what about..?” objections to their business. Given their size and ongoing revenue, they’re best positioned to do so. The question isn’t whether the coupon business is big enough to support their valuation. The question is, what small business problems can’t be partly solved by software—and who can get faster distribution than Groupon?

“Google’s Superior SEO”

It’s a running joke in the SEO industry that Google follows few of its own best practices for SEO, except as they apply to site performance. Google+ is the first major property to belie that. It’s true that Google+ is better optimized than many other social networking pages, but the main reason they’re ranking so well is that it’s in Google’s interest to own more branded clicks, and this is the most defensible way to do so.

In other Google news:

  • Danny Sullivan complains that Huffington Post slideshows are a terrible user experience. True enough. But slideshows might be a good way to game Google’s bounce-rate detection: since a slideshow post takes so long to get through, the user won’t be back on Google for at least a few minutes.
  • Unruly, who were behind Google’s accidental spam scheme last week, just raised $25mm.
  • Jon Mitchell of ReadWriteWeb things Google+’s search rankings go too far.
  • As it turns out, Google+ is a great venue for computer science discussions. Not the demographic Google intended to target, but perhaps the one they should have.

Astroturfing in Financial Social Media

Scott Brown spots a hedge fund manager turned Twitter spammer. It’ll be interesting to see if Twitter cracks down on this faster than FINRA.

Ebay Continues its Local Invasion

Ebay wants to own the checkout process; they’ve done well online, but now they’re targeting brick-and-mortar locations through Home Depot. It’s unclear how the economics of this differ from those of traditional credit card networks.

IFTTT Raises a Round

“If This Then That,” which basically mashes up various consumer-facing APIs, has just raised an initial round. It’s hard to imagine them maintaining any kind of competitive position, since every popular recipe on the site should be on the todo list of every product they can work with. Their niche, if they have one, will be among power users—who are disproportionately likely to make a business seem popular, without doing much for its revenue.

Texting Peaks in Finland

A sign of the times: text messaging in Finland is slightly down year over year as more communication moves on to other, cheaper channels.

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Direct response versus branding, SEO agency pricing data, and “Google’s superior SEO”…