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Search and the Transparent Revolution

  |  March 11, 2008   |  Comments

Google Analytics's Benchmarking Service opens the door to online advertising's black box. Will it make advertisers stronger?

The last few years have seen an amazing new trend enter the world of marketing and advertising, and it seems to have been born of the online world: transparency. The word itself is remarkable (as most words are), coming from Latin roots meaning "to show through," and it stands in stark contradistinction from its cousin "invisible." Transparent items can be seen but hide no secrets. Invisible items are pure secret.

In the past several years, marketers have been implored to strive for transparency. Car dealers must disclose actual prices. Drug manufacturers must be upfront about potential side effects. Guerilla marketers need to be clear with the audience that they are being advertised to. Hotels have to tell you if an ocean-view room actually has a view of the ocean.

Now it seems the Transparent Revolution has taken another big step in SEM (define), with Google's recent announcement of its benchmarking service for Google Analytics. The search engine led the crowded field of search engines in the realm of being a complete and utter mystery, so this is a move worthy of a little attention.

The Black Box Cracked Open

When SEM first began to gain favor among online advertisers, the term most frequently used to describe the practice was "black box." That is, advertisers felt like they put a lot of money and effort in and got results out, but they had absolutely no idea what happened inside. Requests for information were often stymied by the engines themselves. Advertisers asking simple questions about their campaigns were told that they simply weren't allowed to know, creating a tense relationship between advertiser and engine.

Probably the single most popular question was "how am I doing?" That is, advertisers could look at their own results, but they didn't have any sense of the context. You'd know that you got a certain number of clicks, based on impressions, but you didn't know if that was the best you could get, or if you were performing above or below the average.

Unfortunately, the engines' (not just Google's) response to this was to tell advertisers not to worry about it. Their logic was "you're only paying for the clicks, so who cares?" Of course, the advertisers cared. They wanted and needed to have some information about the world at large. Advertisers like information, and the engines weren't interested in giving it to them. Nothing is more important for SEM than optimizing your campaign. But it's extremely difficult for anyone to optimize toward an unknown goal, if for no other reason than you need to appropriately apply resources. That is, if you have only one person working search, at what point do you say "we're good on return; move on to the next critical project"?

The introduction of benchmarking at the engine level will go along way toward helping marketers make this decision.

Perfect Information

SEM is one of those close-to-ideal market scenarios. In any market, the critical ingredient is information, and the ultimate goal is perfect information. The Wikipedia entry on "perfect information" is clear:

    Perfect Information is a term used in economics and game theory to describe a state of complete knowledge about the actions of other players that is instantaneously updated as new information arises.

Perfection, of course, is impossible to attain, but the benchmarking project moves us a lot closer. Marketers wouldn't participate in a perfect-information benchmarking project, where their exact, specific data would be supplied to a competitor. That would be too much disclosure and potentially lead to aggressive attacks from predatory companies.

But Benchmarking does it better: it aggregates all the information into a single index. This not only obscures one particular company's secrets but also makes the whole thing way more useful by presenting information in a dashboard model. The problem, of course, is only the data of those participating in the program are included in the index. It's entirely possible that a company doing either very well or very poorly wouldn't participate, so the index is built on an incomplete dataset. Perhaps only the best performers would participate to see if they could do better. Or only the worst would participate, struggling to find some way to increase results.

Participation should be mandated. But that won't happen. So, here's my advice: opt in to the program and tell everyone you know who uses SEM to opt in.

Opt In Now

Perfect information is a concept used in game theory, an approach to economic problems that imagines all participants as players in a game where they are trying to maximize their own return. The thing is, there are competitive games and collaborative games. Search feels a lot like a competitive game, but it's actually collaborative. There's no set price for any keyword, and no one wants to overpay.

In the absence of information (i.e., what everyone else is paying and how successful they are), companies are forced into a situation where they have to increase price in an attempt to achieve top position. But second, third, fourth (and so on) positions are also valuable, provided you pay the right amount for them. The only way out of this situation is to have a safe way to share information.

You could argue that the engines are motivated to not give information. The more someone pays for a keyword, the more revenue they generate. That's short-term thinking, since advertisers won't continue to overpay forever. So, all advertisers vying for a particular keyword and the engines themselves get into stronger positions if information is shared.

Please, do two things. If you agree with me, ask everyone you know to participate. If you don't, drop me an e-mail and tell me.

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ABOUT THE AUTHOR

Gary Stein

Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.

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