Is traffic cost inflation stalking you, or has it fully violated your 2007 marketing budget? No online marketer is exempt; online traffic costs will increase. It's the nature of supply and demand.
This relatively new Internet economy is settling into familiar patterns, and the costs of doing business online are beginning to resemble those of our brick-and-mortar brethren. In the brick-and-mortar world, there's no such thing as low-cost traffic.
The corner of 57th St. and Fifth Ave. in Manhattan is one of the highest trafficked intersections in the country. So it's no surprise the cost of commercial real estate is priced accordingly. To establish and support a retail store there, you must take advantage of the traffic's high margins and volumes.
Some domains, such as Blinds.com, Diamonds.com, Business.com, and CreditCards.com, are rare. The natural traffic that comes with them is similar to those of well-located real estate. Some brands, like Macy's, Wal-Mart, and Apple, are so well known that they, too, receive lots of natural traffic.
Organic traffic isn't free, either. Most highly ranked sites are firmly established and largely relevant to the search queries they attract. There aren't a lot of these out there.
Most companies simply don't have the capital or means to attract natural traffic flows. As in the brick-and-mortar world, they must work a little harder, advertise more, and otherwise make up for their lack of location. There's usually a correlation between location and ad budget: the better your location, the more traffic you get without advertising; the worse your location, the more you need to advertise.
Online businesses make up for less desirable locations by advertising. They rent high-traffic retail space in the form of paid keywords. Demand increases prices. Short term, online traffic remains a value compared to mass media. Soon, though, online traffic will rival, if not exceed, the cost of offline advertising.
I'm weary of listening to online marketers whine about their PPC (define) spend increases. I admit at one time I thought it was a worthy gripe. No more. The problem isn't that online traffic costs are increasing, it's that they cost so little to begin with.
Things that cost little are perceived to have little value.
If you were to pay the premium for commercial real estate and open up shop on 57th St. and Fifth Ave., you'd make sure your offerings were both relevant and profitable. It's unlikely you'd skimp on the customer experience. You'd have best display cases, décor, staff, lighting, and merchandise. Your storefront would be inviting and engaging. You'd do everything it takes to maximize the traffic potential.
We know several brick-and-mortar retailers that never whine about traffic cost. It's simply a cost of doing business. They understand the traffic's value and are willing to pay a premium for it. They also respect it. They don't expect to be successful just by setting up shop on the right corner. Those with several storefronts know traffic behaves differently from store to store. Some even move away from higher traffic spots into strategically placed locations (with less total traffic) to improve traffic quality and cut overhead.
Compared with offline retailers, some online retailers get traffic for pennies on the dollar. Is it any wonder they treat traffic as something worthless? They simply don't value it. This is indicated by the horrifically low 2.4 percent average online conversion rate. E-tailers are rummaging through hundreds of thousands of paid clicks for uniques, thinking nothing of lost opportunity, nor calculating their traffic's true value. The model's profitable, after all. For now.
Traffic-cost inflation will be good for the industry and the consumer. It will sort out average marketers from the exceptional ones, just as it does in the offline world. Exceptional marketers will begin to treat traffic with respect.
Ways to Add Value to Traffic
Your traffic costs way less today than what it's actually worth. What are you going to do about it?
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Many of ClickZ's leading expert contributors will be at ClickZ Live, the new online and digital marketing event kicking off in New York (March 31-April 3). Hear from the likes of: Jeremy Hull, Lisa Raehsler, Andrew Goodman, Bryan Eisenberg, Mathew Sweezey, Aaron Kahlow, Stephanie Miller, Simms Jenkins, Jeanne S. Jennings, Dave Hendricks and more!
Bryan Eisenberg is coauthor of the Wall Street Journal, Amazon, BusinessWeek, and New York Times bestselling books "Call to Action," "Waiting For Your Cat to Bark?," and "Always Be Testing." Bryan is a professional marketing speaker and has keynoted conferences globally such as SES, Shop.org, Direct Marketing Association, MarketingSherpa, Econsultancy, Webcom, SEM Konferansen Norway, the Canadian Marketing Association, and others. In 2010, Bryan was named a winner of the Direct Marketing Educational Foundation's Rising Stars Awards, which recognizes the most talented professionals 40 years of age or younger in the field of direct/interactive marketing. He is also cofounder and chairman emeritus of the Web Analytics Association. Bryan serves as an advisory board member of SES Conference & Expo, the eMetrics Marketing Optimization Summit, and several venture capital backed companies. He works with his coauthor and brother Jeffrey Eisenberg. You can find them at BryanEisenberg.com.
March 19, 2014