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Over the past few weeks, there’s been much discussion about Groupon and whether its incredible success is coming at the expense of the small businesses that have been running deals through its service.  A number of past customers have stated that their promotions were so “successful,” they nearly went out of business.  There were three main reasons for this:

1. Most were unprepared for the overwhelming number of new customers they’d be dealing with and didn’t have the necessary infrastructure in place to effectively react to them.
2. Others had a difficult time turning new customers into repeat customers.  Businesses that use Groupon basically discount deals so significantly that unless they can get customers to purchase multiple times, they end up losing money on each one they acquire.
3. Finally, some Groupon customers simply didn’t have a handle on the economics of their own businesses, let alone Groupon’s. A significantly discounted product or service — combined with the fact that Groupon takes 50% of the deal price — created such huge losses for some companies that their promotions were pretty much doomed from the start.

The last two points are really the most critical.  And yesterday, Nick Saint, in what could be the first SAI article I actually agreed with, explained why these issues don’t mean there’s a problem with Groupon’s model, just that some of its customers aren’t using it properly.

Having founded a search marketing firm in 2003, this all sounded very familiar to me.  At that time, search was still very much in its infancy.  As we went out to speak with perspective clients, we generally heard one of two things: 1) “Hang on, you mean to tell me there are paid ads on Google?” (which, of course, there were) and 2) “I’ve tried paid search before and it doesn’t work for my business.”

While there was undoubtedly some percentage of companies for which that was truly the case, the overwhelming majority of them weren’t seeing poor results because search couldn’t be effective for them, but because it was a new channel that they didn’t take the time (or have adequate resources) to figure out how to use.

For instance, many advertisers were unaware that search engines provided daily budget caps.  As a result, budgets that were intended to be spent evenly over a one-month period, were sometimes spent in a day (or less) instead, with nothing to show for it.  Other advertisers were completely oblivious to the art and science of keyword research, spending money on keywords that had tremendous volume, but would never be used by perspective customers.  And still other advertisers knew nothing about match types and were therefore taking no measures to control who was actually seeing their ads.  The list of reasons why a lack of understanding for the way the channel worked led to poor performance obviously goes on and on from there.

The other issue that led some early search advertisers to the false conclusion that search couldn’t work for them was a lack of understanding around metrics and how success would ultimately be measured.  Advertisers who had experience with display were focused on impressions, sometimes setting a goal of always being in the #1 position for all the keywords they were buying.  Others asked that we optimize campaigns around click-through rate.  The bottomline is that these advertisers took few, if any, measures to improve campaigns while they were running.  They just took a look at the results once the campaign was finished, saw that they had acquired few new customers, and declared the channel ineffective.

As a result, we (and many other SEM’s) spent much of the first two years we were in business evangelizing the merits of search marketing to some of the world’s biggest brands and reversing false perceptions of how it worked (or didn’t).  At the same time, Google began providing a variety of comprehensive resources for smaller advertisers so they could better understand the benefits of search and the mechanics of how it worked.  It was really at this point in time that search began to take off.

I was once again reminded of this experience after Twitter’s recent announcement regarding Promoted Accounts.  While I’m pretty bullish on Twitter’s suite of “Promoted” products long-term, I wonder if it may be going down a similar path to the one I’ve described above.  To the company’s credit, Twitter has taken a slow, controlled approach to all product launches and has shown no reservations about killing products (e.g. Early Bird) that aren’t performing.  Twitter’s also done a seemingly good job of limiting the number of advertisers testing new products and offering the necessary amount of hand-holding to ensure things go smoothly.  But the type of scale Twitter’s been talking about creating — and that its investors and the market expect — will require going way above and beyond Fortune 500 advertisers.  One need look no further than Ad Age’s recent article about Google’s top advertisers to see why that’s the case — the Top 10 advertiser’s in June accounted for less than 5% of Google’s U.S. revenue during the month.  The number of companies advertising on Google is in the millions.  It is impossible to hold that many hands, regardless of how large your company may be. 

Offering advertisers the ability to purchase qualified clicks — or in Twitter’s case, qualified Followers — can be powerful, but only in the event that potential advertisers first understand how to properly leverage a large following.  I’m not sure that the overwhelming majority of them know how to do that at this stage.  

It seems clear that the success of Twitter’s Promoted Accounts offering is going to be dependent on scalable resources that help advertisers understand the benefits of Twitter so they can effectively engage newly acquired Followers.  That needs to be combined with tools that allow them to properly quantify success.  Otherwise, what was previously “I paid for 100,000 clicks to my site and no one bought anything” will be “I paid for 100,000 followers and it had no impact on my business.”  And that would be a shame.  

Follow me on Twitter: @hershberg

Last month, I tweeted that:

Twitter’s coming ad platform is going to create quite a bit of tension between digital agencies and their search-specific counterparts.

A few people asked me to elaborate on that point and given that Twitter unveiled its Promoted Tweets product this week, it seems like a good time to explain what I meant.

Ad agency execs will be among the first to admit that their companies have a miserable track record when it comes to identifying new trends.  And even when they have sensed shifts in the market, they’re generally so slow to react to them that they end up addressing the problem with the same response anyway – through the acquisition of companies they probably never should have let exist in the first place. 

That happened in the late 90’s when traditional agencies, thinking online was a fad that didn’t warrant significant investment, were forced to acquire interactive agencies.  Amazingly enough, those same interactive agencies then went on to largely ignore the emergence of search, only to watch it rise to account for nearly half of all online ad spend.  Once again, ad holding companies were in a position where they had no choice but to acquire search marketing firm’s (SEM’s), not only because they were interested in capturing the upside associated with all the dollars going to search, but as importantly, because their lack of search expertise created potential downside by putting existing client relationships at risk too. 

So, when social media marketing (SMM) started to appear as though it was going to be the next big thing a couple of years ago, digital agencies seemed determined not to let history repeat itself — they moved aggressively to build out a set of services that would make them competitive in SMM.  They weren’t alone, of course.  Companies from all corners of the Marketing Communications world, including PR firms, creative agencies, and yes, search marketing firms, did exactly the same thing.  The fact that social media platforms hadn’t yet created paid ad programs that provided real benefit to marketers meant that most agencies focused on using “earned” media tactics instead, and every type of agency could make a compelling case as to why SMM was most directly aligned with its legacy business. 

This ultimately created a scenario where most holding companies were hesitant to position any one of their agencies as its SMM specialist.  Instead, they’ve allowed agencies to compete with one another with the expectation that the market would ultimately sort itself out and help them decide the best way to move forward over the long-term.   

A series of recent developments would indicate that order is finally being created in in the world of social media.  First, Promoted Tweets (understandably) look an awful lot like Google’s paid search programs — both AdWords and AdSense.  This means that marketers who use the platform will need to be experienced in the art and science of services ranging from keyword research, to writing ad copy featuring strong calls to action, to real-time bidding in auction-based environments that reward relevancy.  Using Promoted Tweets at scale is also going to require systems (i.e. real technology) that can aggregate, process, and report on massive amounts of data.  

Facebook’s “Ads” program, which also bears more than a few similarities to paid search, is starting to gain some traction too.  And Facebook knows much of its future growth is going to depend on its ability to meet the needs of direct response advertisers.  For that reason, it’s started looking to the search marketing community for guidance on how to best develop and then evolve its platform.  All Facebook reported that Facebook execs at last month’s SMX West (a search marketing conference) “expressed a deep appreciation for the sophisticated analytics SEM professional use to hone campaign performance at scale.” 

All this reminded me of a 2005 blog post I wrote in response to criticism that search was too narrow a category for an agency to focus on exclusively and that it would ultimately be absorbed by larger brand strategies.  

Back to the original question we were faced with [when starting Reprise Media] - of whether search is a big enough business for search engine marketing firms - it’s actually become irrelevant. SEMs haven’t had to migrate towards offering other ad programs because the market has actually migrated towards them instead. We’ve seen this manifest in bids on ads in RSS, bids on behavioral advertising, bids on the “automotive” category in Quigo’s AdSonar network…It’s like one broad pool of content networked together by advertising.

At this stage, you can add Promoted Tweets and Facebook Ads to that list. And given the parallels between the histories of search and social media, it seems obvious that SMM’s real growth is going to be tied to these paid programs.  While digital agencies can continue to position themselves as experts in the services that have historically been associated with earned SMM (conversation monitoring, sentiment analysis, creation and management of social media profiles, etc.), it’s difficult to see how they can make the case that they’re best equipped to handle paid media as well.

And this is exactly what’s going to create the tension I previously alluded to.  Digital agencies finally anticipated the emergence of a new category and took proactive steps to make sure the opportunity didn’t slip away.  But given the way platforms are evolving, it’s clear that their search-specific counterparts are actually better positioned to manage SMM.  It will be fascinating to see whether digital agencies continue trying to compete with partners for something that can no longer be considered a core competency, knowing the alternative is watching what could be massive amounts of revenue go somewhere else yet again.
  
Follow me on Twitter: @hershberg 

They certainly picked a questionable day to make the announcement, but as of Wednesday, Google Social Search is available to all Google users and it’s definitely a big deal.  Marshall Kirkpatrick probably summed up the reason why best by saying:

This is a very big step. What’s your portal to the Internet: Google’s algorithmic search of the Web at large, or your social circle of people on Facebook? That’s the battle for the future that Google and Facebook are waging now, and Google Social Search is a big move.

Of course, the prerequisite for using Social Search is the creation of a Google Profile.  These pages can include various pieces of information about a person, including companies worked for, schools attended and most importantly, links to social profiles created on other sites across the web.  Google users who have added at least some of this information to their profile pages can now use Social Search to see a customized set of search results consisting of content created or shared by people in their social networks, including Twitter, Flickr, and Google-owned services like Gmail and Google Chat.  I spent some time with it earlier this week and while Google’s record of my “social circle” (defined as friends and contacts) seemed pretty outdated (it included people I had stopped following on Twitter months ago), it’s a major step towards meeting recent calls for a service that allows our questions to be answered by our friends.

Needless to say, the ultimate success or failure of Social Search hinges on Google’s ability to get a significant number of users to create their own profiles — something it has struggled with in the past.  Absent that information, it doesn’t have the ability to make sense of someone’s social circle.  But what I think is perhaps less obvious, yet equally as important, is that Google’s chances of owning real-time search also depend on its ability to have users create a critical mass of Google Profiles. I think Google knows this and that we’ll see them make Profiles a priority in the future.

The Relationship Between Google Profiles and Real-Time Search

I’ve been very critical of Google since it launched its real-time search feature in December.  For a company that obsesses over always offering a simple and clear user experience, the “Latest Results” section of a reply page seems surprisingly out of synch with the rest of the page’s content – almost as though it were implemented as an afterthought.  Additionally, I’m often confused as to when Google is going to show real-time results for a given topic and even more importantly, why and how its decided whose content to feature.  Generally speaking, I’ve found Google’s real-time results, particularly tweets, to be irrelevant and pretty mindless.

So, I was very interested in Technology Review’s interview with Google Fellow, Amit Singhal, the person responsible for Google’s ranking systems and who led development for real-time search.  When asked about methods for determining tweet relevance, Singhal likened it to PageRank, the process Google uses for ranking web pages, saying:

“You earn reputation, and then you give reputation. If lots of people follow you, and then you follow someone–then even though this [new person] does not have lots of followers,” his tweet is deemed valuable because his followers are themselves followed widely.”

I’ve spent quite a bit of time thinking about this statement over the past couple of weeks and it makes so little sense that one of two things must be going on here.  Google is either absolutely clueless as to how the process it developed for ranking web pages can be properly applied to tweets (possible) or Google is being as opaque about what it plans to do here as it is about pretty much every other aspect of its business (likely).

To begin with, when determining the relevance of a tweet, the absolute number of followers that user has is essentially a worthless metric.  It’s basically the equivalent of saying that web pages with lots of links are inherently authoritative, regardless of the subject.

Singhal’s stated approach to ranking tweets also assumes that everyone is a generalist and that they can speak about any topic with the same amount of expertise when that’s obviously not the case.  For instance, while I would put a lot of stock into what Paul Krugman, who has ~350K followers on Twitter, has to say about economics and politics, I wouldn’t turn to him for an opinion on music.

Google must find a way to account for the fact that tweets from the same user about different topics don’t necessarily have equal amounts of value.  Looking at number of followers alone does not come close to accomplishing that.

Separately, I can’t understand why people (and companies) continue to make a distinction between reputation and authority on Twitter and reputation and authority in the real world — they are one and the same.  If someone is a proven expert in her field or has firsthand experience with a given topic, shouldn’t we value what she has to say about it regardless of how many people follow her on Twitter? 

Prior to signing agreements to have tweets included in Google and Bing search results, Twitter was basically an island, which made it very difficult, if not sometimes impossible, to match someone’s Twitter account with the rest of their social profiles.  The combination of Twitter’s data feed and Google Profiles changes all that.  Think about all the information about each individual user that Google now has the potential to thread together:

• LinkedIn profile: Includes work history, schools attended, current location, links to other personal websites and recommendations from friends and co-workers.
• Feed reader: Provides insight into the types of content I’m interested in consuming.
• Geo-location information: Provides verification that I checked-in at a specific place or event and could therefore place higher priority on my firsthand experience.  A huge improvement over the current hashtag “solution.”
• Disqus profile: Blogs I moderate and those I comment on.
• Last.fm, Pandora, Lala, etc profiles: History of types of music and specific artists I listen to.
• Photo albums: Provides insight into the places I’ve been.
• Etc, etc…

Google is the only company I can think of that is likely to give enough incentive for users to provide this information (access to Social Search) AND that has the ability to fully leverage it.  As a result, Google will be able to index and then properly filter and rank tweets based on an aggregated and (nearly) complete picture of each user’s profile — not just the number of followers someone happens to have.  That is how real authority and experience should be determined.  And if that’s the case, there’s no way that even Twitter can rank tweets as well as Google can — it simply doesn’t know enough about each of its users.

Google’s history with social media absolutely sucks and past attempts to get users to create Google Profiles have resulted in very little success.  But I am not ready to count Google out just yet. If it can properly communicate the benefits of creating a profile – which will require significantly more promotion than serving an ad to people googling “me” (literally) – I think Social Search will get some traction.  And Google knows the profile information users share won’t just improve their personal search results, they’ll help Google improve a major component of its real-time index as well.

A couple of related notes:

The point has been made that Google’s Social Search is dependent on many of the services mentioned above making all of their data available to Google.  I agree.  Still, Google does not need agreements with any of these companies to index public profile pages on each of these sites.  That is apparently what it’s currently doing with Facebook.  When aggregated together, the information contained on those public pages will generally provide enough insight to give Google a more complete picture of the person behind each Twitter account.

Also, I don’t believe that Twitter search and real-time search are synonymous with each other, though this post probably reads that way.  That is because Amit Singhal was discussing how Google ranks tweets exclusively in the context of the real-time web.  As Google improves its ability to determine the relevance of tweets, it’s likely that they will be featured in broader search results as well.  

Follow me on Twitter: @hershberg