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Are You a Dumb Grasshopper?

Published: June 26, 2007

Author: David Rodnitzky

Just a few weeks ago, I wrote a post about Google’s very smart decision to provide more transparency into their listings. In that post, I wrote

Google has led the charge toward PPC transparency. They make it easy to bundle Google Analytics with your paid search campaign, they offer conversion tracking, negative keywords, site exclusion, and most recently “search query” and “placement” results (so you can block bad AdSense publishers and bad broad-match keyword extensions).This is not Google’s attempt at advertiser altruism – it’s a smart, calculated business move. If you have the best traffic, you should flaunt it. And that’s what Google is doing.

Normally, when Google does something it’s competitors make a point of following, albeit usually in a disjointed and blundering fashion. For example, when Google announced Gmail was free with unlimited storage, Yahoo quickly reversed course and offered free storage for Yahoo Mail (I believe at the time they were gradually increasing the pricing for Yahoo Mail’s “premium service”). Similarly, when Google launched AJAX maps, it wasn’t long until AJAX became the programming language of choice among all other map companies.

With respect to transparency, however, Google’s role as Pied Piper has had mixed results. On the one hand, Google’s search competitors have done a very good job of matching Google step-for-step.

For Yahoo (f/k/a Overture) this has resulted in a major push toward getting people to download Yahoo Conversion Tracking and Yahoo Analytics. MSN AdCenter has also started to provide some very cool transparency tools. I am particularly impressed with some of the stuff they have in their AdLab, which for whatever reason, reminds me of the Bat Cave. Check out MSN’s “commercial intent” query in their lab, it is pretty cool.

What’s amazed me, however, is how little the Comparison Shopping Engines (CSEs) have embraced this race toward transparency. I recently had two encounters with major CSEs that
drill this point home.

In both cases, my accounts suddenly got reams of traffic. And not just any traffic – bad, non-converting traffic. For example, this weekend, one of my accounts – which had been averaging almost exactly 100 clicks per day and making a profit – suddenly got 5000 clicks in one day, with a conversion rate of about .25%. Needless to say, this cost me a lot of money. A few months ago, on another large CSE, the same thing happened – thousands of clicks, out of nowhere, with no conversions.

Bear in mind, this has happened to me on all the search engines as well. In each case, I document the issue, send it off to my rep and usually end up getting some or all of my money back.

In the case of the CSEs, however, the response has been exactly the opposite. After my sudden bad traffic spike a few months ago, my rep at the CSE told me that I was “paying for clicks and not conversions.” The only remedy I had was to set a monthly maximum budget and hope for the best. “Bid for overall profitability, don’t worry about losses from one day to another” was the other advice I was given.

And today when I talked to my rep at the other CSE, I was told that one of their partners had run a promotion for a product on the partner’s home page. Moreover, because the CSE did not negotiate any sort of “bad click credit” with the partner, it would therefore be impossible for me to negotiate a bad click credit with the CSE. In other words, they were passing the losses on to me. In one day, any profit I had for the month was wiped out. Doesn’t really make me excited about continuing my campaign with them.

Even more amazingly, the majority of CSEs don’t allow you to place product-level bids, none that I know of have reporting APIs, most don’t have daily budget caps, and some don’t even have UIs that allow you to pause campaigns.

Compared to the search engines, the CSEs are truly in the dark ages! I can only conclude that a healthy percent of CSE revenue comes from advertisers who aren’t tech-savvy enough to track actual profit from their CSE investment – good ole’ “dumb money.”

This sort of strategy, if true, is basically a house of cards waiting to collapse. Over time, as Web analytics becomes cheaper, better, and easier to install, more and more “dumb” advertisers will gain the insight necessary to shut down their bad campaigns on the CSEs.

Meanwhile, Google Base listings are showing up within Google results and Checkout is being pushed heavily at GooglePlex. Attention CSEs: if you think you can continue to pull the wool over dumb advertisers, the judgment day is coming. Once Google starts to provide your customers with the true ROI of their investment across all CSEs, you’ll have a lot of angry ex-customers. Or perhaps to put it another way, Google will have a lot of your ex-customers as new customers.

Dumb advertisers will eventually learn to be smart. Dumb CSEs can fix their business models today and salvage their relationships with their advertisers, or they continue to rake in some extra bucks today at the expense of tomorrow.

Back when I was a dumb kid, I seem to remember a tale about a grasshopper who lived for today and an ant that prepared for tomorrow. When winter came, the grasshopper had no food and died.

Dumb kids know not to be the grasshopper. Maybe it’s time some comparison shopping engines brush up on their Aesop’s Fables.

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