developerWorks: This is a developerWorks podcast; I'm Scott Laningham here with Todd Turbo Watson. Our guest is Bill Hunt, author of Search Engine Marketing, Incorporated, and CEO of Global Strategies, Inc. Bill works with many Fortune 500 companies around the globe on their search strategies. He's also a member of the Google Technology Council. Welcome to the podcast, Bill.
Bill: Thanks, Scott. I'm looking forward to it.
developerWorks: You know, obviously since you're with the Google Technology Council, and something Todd and I had been talking about earlier in the week, all this downsizing of services at Google, what's going on with that consolidation? We talked about Google Print and Notebook and Haiku. Can you talk about that a bit?
Bill: Yes, I think that, you know, Google's really starting to wake up and say, you know, while it's good to send a bunch of developers off on different projects, at some point, you know, they've got to look at the numbers like a proper company.
I think that some of these with probably the exception of Google Notebook had, you know, didn't have as wide of an adoption as they had, and I think they've got to sort of either cut some engineers or bring sort of bring them back to the center on what they do.
I mean, if you can imagine every engineer gets, I think it's 20 percent of their time to work on pretty much whatever they want. And if you take that across 10,000-15,000 engineers, that's a lot of time that could be put forth to the mother ship.
So I think that's what's happened with some of these. And I think that they're a company that just wants to throw stuff up on the wall and see what sticks and some phenomenal products have come out of that.
But I think the idea of Google Print was good and it's part of the sort of having Google in all forms of media, it's just sort of tied back into this whole cutback.
And not as many people are reading things online. And you look at things like Lively. You know, Second Life has never really taken off to the degree that people thought. So, where do we want to reposition these engineers to get the best and maintain really the core revenue?
I mean, you look at Google, 72 percent now of all searches are done at Google. And so, you're going to have to shift the horsepower over to the mother ship activities to make sure that that stays rock solid.
Todd: One of the things that didn't escape my notice when I looked out at a lot of the recent earnings reports was Google's fourth quarter. And even though this isn't really about the business side of things, I mean, it's still noteworthy in terms of the fact that they were boasting a profit even though their net revenue was down.
And it seems to me they're like one of the few that actually can grow through such a down economy, even though clearly they're making some adjustments. And what explains that? What is it about what they're doing that distinguishes them compared to some of the other players in the market like Yahoo! and MSN and others?
Bill: Well, probably the biggest thing, I mean, if we just do a comparison to other proper businesses, everybody else is creating things. You know, they need cost of goods sold. They've got to buy hard goods and things like that. In Google's case, I think the last number I saw, 95, 96 percent of their revenue comes from paid search ads.
And so at this stage of the game, they're still, they've got their machine humming. And I think one difference between Google, Yahoo! and MSN on a search-engine level is Google right out of the box really understands this concept of extremely efficient server farms.
And if you look at the difference in the two properties, [you see] where Yahoo! has all kinds of other stuff. Yahoo! first and foremost is a portal. And as a portal, you've got 18 or 19 different categories of business where they're churning out content licensing, content, doing all those things [like] people editors, all of that. So think of the overhead that they have to manage [for] that content at Yahoo!.
And MSN's pretty much the same. The only thing MSN has is they've been in catch-up mode forever and they've not necessarily honed these infrastructure efficiencies.
I mean, look at Google. Google has got data centers in low-cost areas, North Carolina, Oregon, where they're able to use wind power [in Willamette Valley] in Oregon and solar power in North Carolina and things like that. I think that's one of the things that Google's gotten really efficient [at] in the core sort of costs of doing business. And the fact that, all they've got to do is make sure there's good quality content that shows up on the search results page and people click.
So it's things like that that makes them [and] the whole business model much more efficient. And some of these cuts and changes in other areas are those sort of expense-oriented things, so developers on Lively or Notebook and things that aren't able to turn revenue, I think it makes sense to cut things like that. So I think that's the big difference.
We look at the people who use Google, the people who click on the paid ads, I think that that's really demonstrating that they get a million more people to click, that's a million more sort of dollars in the bank that it took them almost nothing, no cost, no infrastructure, to generate that increased revenue.
Todd: Well, that makes sense ... but I look at that number you threw out about paid search, 96 or so percent. It seems to me that in the longer term that could be an exposure.
And even though they let several of these properties go, the ones that were mentioned earlier, there's still a whole range of properties that I just don't see a lot of marketing or that type of monetization going on. And it makes me wonder why because there seems like there's some pretty attractive properties out there in Google.
Bill: Absolutely. I mean, they understand this clearly. Look at last year when [comScore] said basically it looked like their search volume was down and it turned out to be that [comScore] wasn't counting the international traffic. You know, analysts freaked out, everybody said the sky was falling, and Google had its first real blip since it had been out there.
It's like what if there's a serious retraction and all the big advertisers started pulling away from paid search? They're extremely vulnerable.
And so that's why they saw that they need to cultivate things. But I think again there's sort of a mix mash. While the bulk of the sales force is out there hawking, trying to drive people, and one of the things we see is on the tech council and just in general there's this perceived disintermediation of agencies going on right now. And a lot of people are frustrated with Google because the agencies are ... or, Google's going direct to senior executives and saying, look, we have this big sort of portfolio stuff you can do, Google TV and you've got all these other vehicles.
You know, I think they're trying. I just think that in some cases they don't know how to sell those other things. They're trying to really portfolio, create packages in hoping that some of the things like Google docs and those things will replace it.
Now, I know a number of people that have pretty much stopped using some of the Microsoft products to do things, use things like Google docs and some of the open source tools. So I think that going down, they have to go down these pathways because yes, as soon as anyone loses confidence in paid search or something that I'm sure we'll talk about, this whole privacy issue, let's say people lose confidence in paid search because there's a belief that every click is tracked to the nth degree and nobody wants to click it.
There's also the risk that we see now, which we'll talk about in a moment, is still 70, 80 percent of people click organic results. So I mean of the gazillions of visitors that come to Google only between 10, 20, 30 percent, whichever number you believe are generating 90, 95 percent of their revenue, which, that would scare me to death, is that such a minority of the traffic I'm truly able to monetize.
So we've got to think of other things. But at the same time, the essence that made them Google with zero advertising was sort of those organic search results. And so, I think you're right. I think that the senior executives are desperately ... I mean not that bleak sounding, but I think they really are trying to find some of these. And those that don't work, at least they're smart enough from a business perspective to cut them loose.
developerWorks: Hey, Bill, I'm one of those users that just moved away from some of those on your PC-based products and trying to use Google a lot. And Todd and I were talking about that very thing last week with some of these downsizing of services issues.
And I'm wondering, for users that might see this as some kind of a sign of, well I'm going to be vulnerable if I rely on all these, on the cloud, do you think they should be having any concern taking away from this any concern, or is it ... is that unnecessary?
Bill: I think they should, but I mean if we look at it, the average person isn't thinking like that. So Google Notebook went away. There's other tools out there, but what ... but you're right, if they start to cut back things and you've adopted your whole business to sort of cloud-based applications, you run that risk.
You know, will you be able to go get something on the PC. I mean, there's great analogies that dive shops use to sort of, because right now it's actually very significantly cheaper in most cases to buy scuba gear -- not the regulators but all the accessories -- online. And the dive shops will tell people, it's like look, you might have went and bought that mask online but you'll never be able to buy air online.
And I think that's the thing, is if we go completely to the Web route and it puts people out of business that are making sort of bits and bytes in software stuff, what do we have to go back to?
So I think it does open them up for the smarter people who will ask, well, what else are you going to cut? And is this at risk, and what is the profit point to where you will keep it? I do think it is, they are definitely vulnerable to that.
developerWorks: Now, does that translate to developers in terms of developing around the whole cloud concept, or do you think no, that we're talking a different perspective there?
Bill: I think it's a little different perspective. I think people developing for it should definitely be, let's develop good stuff. Why don't people adopt it, because we can't wean them off what they're used to. And so if there's something better, and I think that my frustration a lot of times with developers is they think like developers. You know, they don't think like an end user.
You know, what is the application of something? Is it easy to use? Is it easy to adopt? And I mean, Google's a prime example of adoption without heavy marketing. Why did people sort of leave Alta Vista or Yahoo! and some of these other dominant search engines to go to Google? Because it was easy to use and it brought back the result that you want.
So if the developers, keep that in mind, how can I, through what I'm developing in my functionality and my quality code, can I help sort of expand this whole new adaptation. So I think that if people think that way -- is my contribution to this going to improve things -- I think it's pretty empowering for the developer.
Todd: So, Bill, it's Todd. Following up and coming back to some of the core means around search, I'm interested as somebody who literally wrote the book and who's a practitioner out there, what are some of the key trends that you are seeing in the marketplace with your clients and with Google and with some of the other key players, agencies, et cetera, around search marketing?
Bill: I think the big thing now, it's like I speak at all the different conferences around the world, and over the past three or four big events, probably the biggest thing I'm seeing is people want to know how to get more out of it. What should I be doing?
And I think that I've talked to some people that are not clients, are just people we've met at events. And one mentioned he had looked at his paid search campaign that was being managed by fairly large agency and it hadn't looked like it had been changed in months. And it was basically set and left and was doing their thing and they were sort of meeting the numbers that the client expected, so you know but there was no additional efficiencies being inked out of it.
And I think that I've heard this from, through one of our clients mentioned this, hey, guys, how do I wring the towel? How do I get those last couple drops of goodness out of search? How do I make more people click? How do I make more people convert?
And I think that that's probably one of the biggest trends that's out there is people aren't necessarily in the paths that they wanted more, they would shovel more coal into the Google furnace. Or they would write a bigger check to Yahoo! hoping that more money meant more impressions and more clicks. And I think now people are now starting to really clamp down and say, guys, how do I really get more out of this? You know, like a race car driver: I can't change my engine, but can you change the fuel mix?
And that's really what we're hearing, is how do I get more out of it? And probably the other biggest change I'm hearing is I've been in two or three meetings in the past maybe four weeks where I heard major, major clients say everybody's coming in right now, the times are tough for everyone.
And everyone, email people are trying to get more money or keep their budget and the banners and TV and everybody's in there sort of begging and pleading their case why their individual silos should keep their budget or get more money.
And I've heard two, two senior marketers in different companies say, guys, stop. You know, stop fighting against each other. You know there's a limited amount of money. Come to me and tell me how we can integrate this stuff so that it's seamless, that it's always on and that as our customer sort of traverse the Web or offline we're touching at each of those intersections.
And instead of bringing me 14 separate approaches, go off and meet with each other and come back and tell me how you can all play nice together and integrate it. And I think that's another huge thing that we've never heard. And that violates how many agencies are run, how most companies are structured. And I think that that's another huge, huge change.
And then the third one probably is how do I change that marketing mix? Do I take money from TV and put it in paid search? And we're starting to see this resurgence of interest in organic search.
As I mentioned at Google, depending on the numbers you look at, it's anywhere from 70 to 90 percent of the people clicked on the organic stuff and we've have had cases where a company has spent three, four, $500,000 trying to make organic work and spend $15 million on paid search. And an astute executive will say, "well, wait a minute. Why is there such a difference when so much of our traffic comes from the free stuff in Google?"
And I think that's the other, that's sort of that third point is people are really starting to say how do I change this media mix? And as we talked about, magazines are shrinking, newspapers are shrinking. If you look at TV shows viewing is changing. You know, we've got all kinds of social media in the mix now.
And I think that it's really disrupting these sort of marketing models that are in our DNA. You know, for whatever reason, we sort of come to work in our first marketing assignment and we've been trained that it's TV, it's print and it's this and that and trade shows and maybe a little bit of this digital stuff.
And the new crop of people are walking in and saying, wait a minute, I'm all digital. I don't watch TV, I don't read newspapers. I get everything I need on my iPhone. So why are we doing this old stuff? So I think those are the biggest changes we're seeing and we're going to see people really try to crank down on their campaigns and ink more out of it.
developerWorks: Bill, what you're just talking about there, the paid versus organic and I wonder about some of the papers and news organizations that are gradually making this full move to the Web and dumping print advertising but still maintaining that more traditional model of ads on the page. Do you see that going away as well to where it's more of a Google-type ad-driven thing with customized targeted ads that pop up in a more minimal way even on their own sites or do you think they're going to keep these banners and tiles and everything?
Bill: We could only hope that they would come around to that. But I think it's going to be a blend of both for a while and there's an interesting, I don't remember the exact quote, but at a media conference oh about nine months ago, the head of The New York Times actually stated that they now generate more traffic and consequently more revenue from Google and Yahoo! traffic than they ever got from the online subscription, that wall that they had where you had to pay for like The New York Times subscription. So that's pretty telling, that people are coming in.
But I think traditional advertisers, again, aren't going to want to get away from their videos and their imagery. And so I think that it's still going to be a blend because in many cases if it's contextually sound....
Now, let's combine the two. Let's take the virtues of search ads which are essentially the ability to match either content on a page or query with the right context. And if we knew let's say there's something about a cold snap in the Midwest and the people who make insulation see that and put something in that context or something like that.... I think what most people are scared of is that that there's a American Airlines plane crash and what pops up is an ad for American Airlines discount trips somewhere. So I think that's why a lot of people are still very adverse to contextually based advertising and news sources because the potentially for association to that. But I think we're going to get there.
As more people consume on the Web, it does really truly give us the opportunity to contextually match ads. And I think the dilemma in that, and this is one thing I think our developers can start thinking about, is how do we make that process easier? You know, we can pay a million dollars, do a TV commercial, show it to hundreds of thousands if not millions of people, and it's a relatively easy process. Any time we want to amp up exposure, we run a commercial with no incremental sort of cost to reformulate it....
Whereas, if we want to do this with search or any sort of Web advertising, there's new creative, there's new process, there's new tagging. So it's almost a 10-to-1 sort of work-to-reward in digital marketing than it is in traditional. I think that that's still very scary.
So if our developers can start thinking about ways to make that easier, to improve workflows, to improve contextual relevance, I really think it's going to help move the newspapers and other sort of content aggregators like an ESPN and that into more of this contextual based advertising.
developerWorks: Hear more of our conversation with Bill Hunt in Part 2. You can find related content at ibm.com/developerworks, IBM's premier technical resource for software developers with tools, code and education on IBM's products and open-standards technology. I'm Scott Laningham. Talk to you next time.
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