Ryan Hupfer’s recent guest post on TechCrunch provides an interesting comparison between MySpace and Facebook in terms of delivering an advertising return on investment (ROI).

Ryan is the Marketing Manager for HubPages - a kind of group blog where members earn recognition and money by publishing content on their ‘Hubs’ (content-rich Internet pages). In November 2008 he tested advertising on Facebook compared with advertising on MySpace.

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Interesting blog post by Robert Scoble. He reckons blogging and social media are killing trade shows. Because tech companies are getting the attention - and return on investment - they want from online launches, they are increasingly reluctant to participate in trade shows.

Some companies are reducing their presence (and spend); others are deciding not to go altogether. And Robert Scoble expects the trade show exodus to continue in 2009. And it will probably be a significant exodus, given the economic climate.

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I sometimes hear Internet marketers pointing to adult entertainment as an industry at the leading edge when it comes to Internet marketing strategies and tactics.

But is adult entertainment really so cutting edge? Is it really worth emulating? Well, if you go on things like conversion rates… maybe not.

Last year, Penthouse Media Group Inc., publisher of the well-known men’s publication, Penthouse Magazine, acquired Various, Inc. which owned the leading adult meeting site, Adult FriendFinder, for $500 million in cash and securities.

Was this a good deal for Penthouse? Without knowing exactly what Various, Inc’s profits were - its projected 2007 revenues were $340 million - nor Penthouse’s expected return on investment (ROI) and time frame for achieving that ROI… ONE simple calculation reveals that the FriendFinder network presented an extraordinary opportunity.

Here were the key statistics from Penthouse’s press release at the time…

• The FriendFinder network had around 260 million free members.
• The paid members numbered 1.2 million.

For simplicity’s sake, let’s assume that each of the paid members was also a free member. What that means is that Various had been able to convert a whopping… 0.46% of free members into paid members! If we consider paid members to be additional to free members, the conversion rate was even lower.

So if the average conversion rate of 0.46% translated into $340 million in revenues overall… what would increasing that conversion rate to 1 percent mean? I don’t have enough data to know, but you can be sure that it would have a MASSIVE impact on profits.

Make no mistake. Various, Inc. appeared to have been a highly successful company. But with just a 0.46 percent conversion rate, it was arguably leaving a lot of money on the table. If Penthouse has done nothing more than focus on increasing conversion rates across all the Various, Inc. media properties… it would have made a very good acquisition indeed.

Of course, whether Penthouse has done that… is a completely different story…

In any case, it’s important not to assume that what seems to be good for one industry, is necessarily good for OUR industry or niche.

Who knows? Maybe a 0.46 percent conversion rate for adult entertainment was a terrific result when compared with the conversion rates of other adult companies. But it doesn’t mean we should necessarily go out and use the same tactics and techniques for our online business…

Source: Press Release, “Penthouse Magazine Acquires Internet Social Network Giant Adult FriendFinder for $500 Million”, PR Newswire, December 12, 2007

In a recent Search Engine Watch article, David Szetela provides invaluable advice for organizing the keywords in your pay-per-click (PPC) campaign.

If you’re involved in PPC advertising, David’s articles (and all his articles) are a must-read. In summary, his three (3) tips are as follows:

1. If a keyword has received more than 500 impressions, but no clicks, pause or delete it. It is adversely affecting the relevant ad group’s quality score.
2. If a keyword has had 150-200 clicks but no conversions, pause or delete it. It’s not converting and is undermining your return on investment (ROI).
3. If a keyword gets just one conversion, keep it. If, after generating 30 or more conversions, the cost-per-conversion is still too high, lower the bid price. BUT if the cost per conversion is lower than your target, you might find that raising the bid price is worth it because you should see even more conversions.

Source: David Szetela, “Judging PPC Performance: Focus on Conversions, Part 2″, Search Engine Watch, October 6, 2008

Frank Watson, writing in Search Engine Watch, reckons the real threat to Google may not come from Yahoo, Microsoft, or indeed any other search engine. Instead it may come from social media.

“People are starting to move away from being satisfied with search results,” writes Mr Watson. “They’re starting to develop trust groups with social bookmarking tools and other community or social networks. If this behavior continues, we may see a change in the way the majority of people use the Web.”

Watson seems to be saying that as more people use social media… and as more advertisers follow people onto social media… search engines will lose their pre-eminence, if not relevance.

Hmmm… I dunno. While I appreciate the rising popularity of social media, I don’t see it happening at the expense of the search engines. What may emerge is a kind of morphing of the two - where search results are more informed by social media.
But that’s kind of happening already, isn’t it? At least to the extent that the search engines seem to favor social media results in the organic search engine results.

As for social media advertising displacing search advertising… I don’t see that happening any time soon. Not among direct response advertisers anyway. Nothing yields an advertising return on investment (ROI) quite so high as advertising your product to people who are specifically looking for that product.

So unless social media can start delivering a direct response kind of ROI, it won’t beat Google or the other search engines on the advertising front either.

All the same, I think Watson is on to something. A Google beater may well emerge from social media or ‘Web 2.0′… and it may not be anything we’ve seen yet.

Source: Frank Watson, “Could Social Media Be the Google Killer?” Search Engine Watch, Sep 19, 2008

At least one social network knows how to make money: LinkedIn, the social network for business professionals.

Presumably because of both its desirable member base - professional and affluent - and the network’s ability to target them, LinkedIn has experienced enormous demand from companies wanting to advertise on the network. So much so that it’s able to charge CPMs (cost per thousand impressions) for display ads that start at $30 CPM and text ads from between $12 and $20 CPM. This is when most social networks are lucky to get $1 CPM.

Demand from advertisers appears to have prompted LinkedIn to launch its own ad network. It will also work ad network Collective Media (which targets high-end media sites) to let other select sites target its users when they visit those partner sites.

LinkedIn has 27 million registered users, far behind the 100 million Facebook has worldwide. But, TechCrunch points out, it’s not about quantity… it’s about quality.

It seems that LinkedIn’s ‘quality’ 27 million users offers advertisers a much more valuable audience - with members having an average household income of $110,000, 64 percent male, an average age of 41, and 49 percent ‘decision makers’.

Presumably advertisers expect to achieve a greater return on investment (ROI) money by advertising to these people rather than the members of other social networks.

Source: Erick Schonfeld, “LinkedIn To Launch Its Own Ad Network”, TechCrunch, September 14, 2008

ClickZ reports that more brand advertisers are embracing search marketing.

Hooray… not.

This may be good news for the search engines and media agencies representing brand advertisers. But it’s NOT good news for direct response Internet marketers.

A major downside of brand advertisers pouring their bigger budgets into search marketing is having them bid up the cost of clicks. And because many, if not all, are likely to be motivated by BRANDING reasons, that means their spending won’t be constrained by the need to generate a reasonable return on investment (ROI).

In other words, without any real care about making their cost-per-click deliver a specific ROI, brand advertisers are likely to spend tons of money on getting that top #1 or #2 spot in the paid listings. All of which will bring up the cost of clicks for everyone else competing in that space.

Think brand advertisers won’t attack YOUR market? Think again. Niches to do with weight loss and dieting will have brands like Kellogg’s Special K and Weight Watchers to contend with. Finance and investment niches will have banks to fend off.

And you can probably think of other areas where a brand advertiser may barge in, all guns blazing, willing to spend whatever it takes to get prime positioning. (Quality Score, what Quality Score?)

Maybe I’m being a little harsh. Perhaps it won’t be so bad. It’s possible that some brands will embrace search marketing as a direct response medium.

But having worked closely with a large corporate that unapologetically regards search marketing as BOTH a direct response AND a branding vehicle, I am a little wary.

Could there be a silver lining? Could bid prices for the lower spots in the paid listings still be accessible to small marketers? Could brand advertisers essentially train searchers to ignore or lower their regard for the top positions (because brand advertisers are less likely to display ads that are as relevant)?

Share your thoughts!

Source: Anna Maria Virzi, “Search Is No Longer an Afterthought for Brands”, ClickZ, August 20, 2008

This is truly shameful.

I call myself a marketer. I provide marketing products and services. I publish a 6-day-per-week marketing newsletter.

But when it comes to investing in marketing, exactly what percentage of company expenses do I spend on marketing?

Let me explain…

We’re finalizing our end-of-year financial reports (the financial year ends on June 30 each year in Australia). Although I should keep MUCH better track of these things, the fact is I am not the numbers person I should probably be.

Yes, I’m a big believer in ITTI (innovating, testing, tracking and improving) and it’s the numbers that indicate the extent of any improvements (or lack thereof), but this is a learned skill… not one that has come naturally to me. So I have a tendency to keep track of some numbers… and not others…

So when it came to finally evaluating our annual performance and seeing the numbers in the cold light of day, I was shocked to see how little our company actually spent on paid-for marketing initiatives last year.

Now I should say that this figure does NOT reflect the time we devote to marketing, which is considerable… but it does reflect a “tightwad” mentality. A mentality that is, I must admit, a
carry-over from (a) building two companies with negligible startup capital, and (b) being too product oriented.

So what’s the damage? Well, our spending on advertising and marketing services constituted just 2 percent last year.

That’s right, an anemic 2 percent!

Granted, we poured a lot of our budget into development last year (and still are - if you’re familiar with DomainerIncome.com… you ain’t seen nothin’ yet!) so that was bound to reduce the percentage spent on other things.

But I’ve always thought that the bulk, if not a significant percentage of ANY business’s expenses should be invested in marketing. If anything, there should be NO upper limit as long as the amount spent on marketing is generating a sufficient return on investment (ROI). So the fact that we haven’t followed our own advice is, indeed, shameful.

Moreover, we’ve left money on the table!

So that’s my embarrassing admission… but what about YOU? Have you been fed the myth that Internet marketing is all about freebie marketing tactics and avoiding any marketing initiatives that cost money?

Probably not. Let’s face it, no serious business skimps on marketing.

For us, it’s time to get serious!

Debra Aho Williamson, senior analyst with eMarketer, has done a little analysis and reckons MySpace is becoming better at monetizing its U.S. website visitors.

Assuming MySpace constitutes 80 percent of Fox Interactive Media (FIM) (the division of which MySpace forms part), and based on FIM’s revenues of $225 million in the June quarter… then MySpace’s revenues were $180 million over the same time period. Further, if you assume - as eMarketer does - that MySpace’s revenues were 23 percent greater than the June 2007 revenues, then based on the fact that its average monthly unique visitors were 82.22 million in the June quarter last year and 87.65 million this year… then MySpace is making more money per visitor.

Dividing the quarterly revenue by three… then while MySpace made $0.59 in revenue per U.S. visitor in the quarter ended June 2007, it made $0.68 per U.S. visitor in the quarter ended June 2008… a 15 percent rise.

Nice (guess) work, eMarketer. I’m not just being facetious - eMarketer’s calculations may be close to the truth. MySpace’s HyperTargeting offering - where display ads are targeted based on user profiles - now accounts for one-half of all MySpace ad buys, and costs more than double its regular ad offerings in terms of CPM (cost per thousand). So if MySpace is selling a similar volume of ad impressions, but earning double the amount of money on half of those insertions, you would expect ad revenues to be higher.

Now that’s all very well for MySpace… but are advertisers getting results from MySpace? I know of at least two major corporates that have had woeful results from advertising on MySpace (i.e. I’ve SEEN their results), but that could be due to a range of factors, including aiming at the wrong demographic.

If anyone is seeing a decent return on investment from advertising in MySpace, get in touch and tell us about it. But please, don’t tell me it’s great for branding… (the common excuse used by marketers who don’t understand direct response marketing).

Source: Debra Aho Williamson, “Monetizing MySpace Traffic”, eMarketer, August 11, 2008

The New York Times has discovered what Internet marketers have known about - and been doing - for years: website flipping. In its strangely wide-eyed article about web flipping, the Times observes that flippers are the:

“latest wave of entrepreneurs who, like the day traders and real estate investors before them, are looking to make a lot of money without much effort.

They use little more than home computers and free software to buy Web sites that appeal to a small and specific niche. Then they fix up the sites with hopes of reselling them for far more than they paid.”

Apparently, web flipping is at all-time high with the number of sites sold on eBay doubling over the last three months, and sales quadrupling at SitePoint’s website marketplace.

But although more and more people are buying and selling websites… it’s questionable whether the majority of flippers are really making much money. The average price for those websites sold on eBay? A paltry $78.

Although a small group of savvy flippers are likely to be making the big bucks, it’s not difficult to grasp the keys to profitable web flipping. They’re much like the keys to success in real estate flipping:

1. Identify websites with high return on investment (ROI) potential - sites that are undervalued, and whose value can be substantially increased for relatively little cost.
2. Apply the necessary knowledge, skills and resources to increase the value of the site.
3. Sell the website at the right price in order to achieve the desired ROI.
4. Repeat this process over and over.

Website flipping is NOT something you want to do blindly. Not if you want to make it a significant source of income. So definitely get educated on how to do it properly. Just be selective when it comes to choosing a suitable training program or home study course, etc. Although I have not seen or undertaken it myself, I have heard a lot of good things about Ed Dale’s Dominiche course.

Ed is, in my opinion, one of the more knowledgeable and reputable high profile players within the Internet marketing niche. Plus, he’s a fellow Melbournian! So you might want to check out Dominiche. Otherwise, stay tuned - we’ll explore website flipping in greater detail in future issues of the newsletter.

Sources: Abha Bhattarai, “Find an Undervalued Asset. Fix It Up. Flip It. (Now It’s Web Sites, Not Houses)”, The New York Times, July 29, 2008, Dominiche