April 10, 2009

Role Of A Channel: Google

Google. There's a channel. The algorithm that is managed by algorithms!
  • Does The Channel Scale? This depends upon who you are. I've yet to meet an online business that says that Google scales. In fact, every online business I speak with looks to "detether" from Google. You're less likely to detether from a channel that has unlimited sales potential. If you're tiny, like me, then yes, Google scales. But if you're everybody else?
  • Does the channel do a good job of acquiring new customers? For a period of time in the middle of this decade, when we went from 2 billion searches a month to 32 billion searches a month, Google did a good job of helping us acquiring new customers. I fear our potential peaked in 2008. How do you break through now? Search for a sundress, and all the big and mid-sized players are there in paid search (JCP, Victoria's Secret, Target, Macys, Zappos, Nordstrom, American Eagle). Algorithm fanatics dominate natural search. There was a time, five years ago, when you could make some hay here. Now you're just part of the echo chamber.
  • Does the channel aid in profitable customer retention? Have you seen a study that indicates that, without Google, customer retention drops by "x" points? I haven't seen such a study, either. Then consider that many of you tell me that half of your paid search customers are existing customers. Does that mean that Google is helping us? Is Google sending our customers to competitors (you bet they are). If Google isn't helping you retain customers, and half your paid search customers are existing customers, well, then, who the heck is benefiting from that relationship? Just something for you to think about the next time you hand over $0.40 for the phrase "sundress" so that Google will steer your own customer back to you.
  • Does the channel aid in customer service? At best, a "maybe".
  • Does the channel feed other channels? Google customers are loyal to Google, aren't they? They're more loyal to Google than to our e-mail or catalog marketing programs. And we consistently find that Google customers have lower lifetime value estimates than customers from other channels. Too often, Google is in isolation mode, yielding low value customers.
  • Does Google generate profit? The secret to making Google a profitable channel seems to be two-pronged: Step 1 = Hire somebody to manage a bidding algorithm that outperforms other bidding algorithms. Step 2 = Hire somebody to game the natural search algorithm --- you're not selling to your customer when you work with Google, you're selling to an algorithm that reserves the right to change the rules of the algorithm without your consent. Do these two steps well, and Google generates profit for you.
  • Does Google educate customers? Google does educate your customers. Google tells your customers what your competitors are doing. Customers have never been more educated! Google might be the best thing that ever happened to small businesses, but is frequently detrimental to the brand that uses offline advertising to drive a customer online for research purposes.
  • What is the exit strategy for Google? What are the business scenarios that would cause you to not participate in paid search, and to not care about natural search results? Or what if you're a small business owner that hosts your blog on Google, runs your RSS feeds through Google/Feedburner, analyzes your visitors via Google, and obtains a third of your traffic through Google (oh oh, that's me)? Many online businesses seem to have an active strategy to grow the business independent of Google.
  • What is your R&D strategy for Google? This means so much more than adjusting your keyword bidding algorithm. In our world, Google offers things like Google Checkout, and some of you have told me that Google offers some companies the opportunity to tie inventory systems into Google's systems in exchange for preferred search outcomes. That's exciting and terrifying all at the same time, huh?
  • Does Google lend itself to in-house expertise or vendor expertise? More and more often this expertise is best managed via the vendor community. It seems to make sense to couple smart in-house knowledge with outstanding vendor-based knowledge.
The Channel Advisor walks a fine line working with Google, almost playing the role of a "risk manager". The Channel Advisor recognizes that Google is important, while realizing that one cannot let Google control more than a small minority of the total sales volume --- the volatility makes inventory management very challenging. The Channel Advisor works overtime to find micro-channels within Google (i.e. keywords) or advertising micro-channels (catalog + Google, e-mail + Google) that deliver significant value.

Of course, Google isn't my area of expertise, so your thoughts about how a Channel Advisor manages Google are welcomed.

2 comments:

  1. derek.newman9:36 PM

    Hi Kevin,

    At the end of last year I realized that I am the custodian of Google's favor towards our business. I realized that a significant majority of our online advocacy (we are a non-profit) and commerce success was per Google's favor - and that this relationship was an asset to us.

    I must say I do little managing of this asset and more clutching it to my bosom so that it does not fly away. I wouldn't say that I live in perpetual fear of being shunned by Google (it can literally happen overnight due to some mysterious algorithm update) but that we do everything we can to ensure anything "new" we do with our website cannot be misconstrued as an attempt to game their system.

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