As internet marketing draws to a close, I thought I’d wrap up with what I think is the most important principle I have learned so far – think like Google. You might think, for instance, that a visitor to your site is you customer. Wrong. Chances are they are Google’s customer, who happened upon your site via Google. Google definitely thinks of them as their customer, not yours.
Think of Google’s search results as recommendations. If they recommend you, and your site provides a bad experience, they have provided a bad recommendation, and this upsets them a great deal. You could provide a bad experience by, for instance, having missing pages; Google hates nothing more than sending a user to a 404 (page missing) error. You could also provide a bad experience by having misleading text in your adwords copy. Although not officially recognised, it is quite likely that Google monitors user behaviour, and if they hit your site and leave quickly, you will quickly fall down the rankings compared to a site where people stay longer.
Similarly how Google works is a bit of a black box. This is mostly deliberate, as they don’t want people gaming the system, and hence often many assumptions need to be made when second guessing Google’s inner workings. There are, however, a couple of ways to deal with this. Firstly go back to thinking like Google. And think logical. How would you design the system? Chances are Google engineers are thinking the same way. The second way is to look at Google patents. If you don’t mind wading through legal and tech jargon, you can glean quite a lot of information this way. A good place to start is the blog SEO by the Sea http://www.seobythesea.com/?p=1138.
As a follow up to my last blog post, it looks like people are already building businesses around buying up RMBSes (is that a word??!):
ex-Countrywide Boss Cashing In On Trash Mortgages (And Saving World)
Stanford Kurland, the former No. 2 to Angelo Mozillo at Countrywide, has a new business: Buying distressed mortgages at pennies on the dollar. The business is wildly profitable. It is helping to fix the banking system. It is also helping Americans stay in their homes.
Interesting article from John Maudlin about how the current bond ratings are exacerbating the credit crunch:
It was very convenient for investment banks to get the rating agencies to use the corporate bond analogies, because that meant they did not have to explain a new system. Everyone knew what AAA meant, or AA or BBB. A bond buyer in Europe or at a pension fund simply looked at the rating and hit the buy button. Easy. No need for a lot of research. Make your purchases and go to lunch. While I can’t go into specifics, I have looked into these bonds with some real interest. Let’s assume that you can actually buy an AAA tranche of an RMBS at $.60 on the dollar. That means that 80% of the mortgages would have to go into foreclosure and lose 50% before you would ever lose a penny.
There are AAA bonds selling at steep discounts that are composed of mortgages with 80% loan-to-value in 2005, a 7% interest rate, and 90+ percent performing loans. These loans are being called in as mortgagees take advantage of lower rates and refinance. And with Obama’s new proposed lower rates, even more of these loans will be refinanced. If you buy the loan at $.60 on the dollar, and it gets refinanced, you get an immediate capital gain of almost 50%! If it keeps on being paid, you get an effective rate of about 10%.
So, why wouldn’t there be a lot of institutions standing in line to buy such a dream investment? Because banks fear the danger that the security will get downgraded, just like the thousands of such instruments that have already been downgraded, and then their regulatory capital will be impaired. The technical banking term is that you would be screwed. So you don’t buy what would be a very good performing asset, because of the rules.
So, who can (and does!) buy? Hedge funds and private investors with liquidity. But these “vulture capitalists” (among whom are many of my friends) know that the sellers are operating from a position of weakness. And because there are not enough of them to buy the bonds on offer, the prices of these bonds are very low. Smart money managers are raising money to exploit these distressed sellers.
Let me throw out one idea (there are likely to be a lot better ones, but let’s get some ideas on the table). Let’s move away from using standard bond ratings for multi-obligor securities. Why not rate a bond by the percentage of capital likely to be returned? Let’s call it the Impairment Factor, or I-Factor. If a bond is likely to lose 10% of its capital, then it would have an I-Factor of 10%. An I-Factor of 0% would mean the bond should see all its capital returned, and an I-Factor of 100% would mean that all the money will be lost.
Now, that tells investors something. That’s a useful statistic, as opposed to “CCC.” What does CCC mean? Am I going to lose $1 or $1,000 or all my money? CCC gives me no useful information if I want to buy or sell a bond. And without real transparency, you end up with a world in which a few very knowledgeable buyers can make a lot of money. That is because there are a lot of AAA bonds that are going to zero, as in 100% loss. If you are on an institutional desk and would like to participate in getting some of the better values, unless you have a very sophisticated team with good analysis software, you simply can’t take the risk.
http://www.ritholtz.com/blog/2009/03/the-law-of-unintended-consequences/
I often find it surprising how quickly people forget the past. Not that long ago life was quite different. My postman, for instance, did not drive a BMW. Porsches were for rich, intelligent, and successful people – not estate agents. I can still remember how awestruck I was when, as a little boy, I saw my first Ferrari. Today conspicuous consumption, or at least the signs of past conspicuous consumption, is everywhere. Today’s little Daniels, I imagine, barely bat an eyelid when a Bentley passes by. For most of my childhood I received pocket money of 50 pence a week. One shiny little coin. Several weeks of hard saving would pass by before little Daniel could even afford a matchbox car. My first job, as a paperboy, required getting up at 6am every day, even before school, to deliver newspapers for an hour. Had I not been volunteering it probably would have classified as slave labour. My only solace was the beer and cigarettes it would afford me at the end of the week. That said, I didn’t have much time to enjoy them, as I usually spent most of my weekend catching up on lost sleep.
a fruit of my hard saved pocket money
My somewhat exaggerated self-pity pales into insignificance compared to my fathers childhood. Born in the 1950’s, into a poor area of London, unbelievably he did not have electricity in his house until he was 11. Bath time for my father was a weekly event, situated outside in the garden, even in the middle of the winter, with bath water shared with the rest of the family. Quite unimaginable given they lived just a few miles from central London. Unsurprisingly, given their reliance on candles and gas lights, fires were a continual hazard and not before long their house burnt to the ground.
When you consider that, a mere 40 odd years ago, there were people living in developed cities like this, it helps to put things into perspective. Despite the continual doom in the media, life isn’t that bad. Yes people are losing their jobs, and yes I feel bad for them, but it isn’t the end of the world. Yet. Unemployment might be increasing rapidly, but don’t forget it is starting from a very low base. In the UK, for instance, it is still substantially less than when Labour came into power back in 1997.
UK unemployment rate, source: DataInsight
Ireland, much like the UK, has also been taking its fair share of criticism lately. According to the Telegraph – “the Celtic Tiger is dead, and its cubs are thinking of leaving”. Well, for all the troubles Ireland is in at the moment, it is still measurably better off than even a few years ago. As you can see below, Ireland’s real GDP has doubled in the last 10 years. I doubt even the most pessimistic Cassandra expects Ireland’s GDP to fall 50%. Even if it did, it’s not like Ireland 10 years ago was an uninhabitable wasteland full of starving children and mass unemployment.
Ireland Real GDP, source: DataInsight
If you are often left wondering how Google works fear not - you certainly aren’t alone. Many thousands of people now work in the SEO industry, purely advising on how companies can get themselves higher in organic (i.e not paid for) search results. As you can see below, ranking has a huge effect on your potential traffic, so it is not surprising how popular SEO has become:
Results in:
Total Searches:9,038,794
Total Clicks: 4,926,623
Click Rank1: 2,075,765
Click Rank2: 586,100 = 3.5x less
Click Rank3: 418,643 = 4.9x less
Click Rank4: 298,532 = 6.9x less
Click Rank5: 242,169 = 8.5x less
Click Rank6: 199,541 = 10.4x less
Click Rank7: 168,080 = 12.3x less
Click Rank8: 148,489 = 14.0x less
Click Rank9: 140,356 = 14.8x less
Click Rank10: 147,551 = 14.1x less
(from http://www.jimboykin.com/click-rate-for-top-10-search-results/)
SEO is a developing field, and there is certainly a lot of misinformation and snake oil peddlers out there, but there are a few basic things you can do to get started:
1) Keywords. Think of keywords as the main topic(s) of your page. The words or phrase someone will punch into Google to find you. Once you have your keywords they should be placed strategically with the right emphasis. This means placing keywords in your page title, headings, and URL.
2) URL’s. URL’s should be properly formatted, preferably with keywords and text, not an identifier that no one will understand. I.e Rather than having http://dansstuff.com/item?=199 you should have http://danstuff.com/item?=Magic_Beans_For_Sale
3) Sitemaps. A sitemap is an index of the pages on your site - it contains a structure of your sites content. There are many ways to generate a sitemap, Google has their own tool which you can use for instance. Once you have generated your sitemap you need to submit it to Google who will then use it as the basis to crawl and index the pages on your site. Until they have indexed you it is unlikely, although not impossible, that you will appear in their search results.
4) Inbound URL’s. The core of Google’s search algorithm is referred to as PageRank. Sergey Brin and Larry Page, when they were coming up with PageRank, borrowed the concept from academic citations. The idea is that the more citations an academic paper has for a particular topic, the more likely it is to be an authority on that topic. PageRank treats the internet the same way, except instead of citations it considers inbound links. It is important to encourage inbound links to your site, but you also have to consider the quality of those referring sites. An inbound link from london.edu, for instance, will be worth alot more than one from bonkbonkbonk.tumblr.com :) There are quite a few different ways of link-building. The first and probably easiest is reciprocal agreements with other sites, i.e. you stick a link to my blog on your site and i’ll return the favour. The second is “link baiting”, i.e. creating some really cool content that other people start linking to.
That should be enough to get started. I’ll try and post some more advanced SEO concepts soon.
Yes I finally gave in and signed up to Twitter. I’m still not convinced i’ll use it, but I said the same when I signed up to facebook!
Anyway please ‘follow’ me, I promise to be nice :)
Mine is a mixture of tech, business, design, and other random goodness:
http://sites.google.com/site/dansblah/Home/google-reader-subscriptions.xml?attredirects=0
Here are some of my favourite sites:
http://www.aleablog.com
http://venturebeat.com
http://www.boingboing.net/
http://www.newscientist.com/news.ns
http://www.techcrunch.com
http://www.theregister.co.uk/
http://www.wired.com/rss/index.xml
http://www.order-order.com/
http://www.slate.com?from=rss
http://www.thedailymash.co.uk
http://accruedint.blogspot.com/
http://www.bloggingstocks.com
http://www.calculatedriskblog.com/
http://www.rgemonitor.com/euro-monitor/
http://ftalphaville.ft.com/blog
http://www.itulip.com/
http://www.nakedcapitalism.com/
http://www.rgemonitor.com/roubini-monitor/
http://paul.kedrosky.com/
http://krugman.blogs.nytimes.com
http://www.ritholtz.com/blog
http://market-ticker.denninger.net/
http://themessthatgreenspanmade.blogspot.com/
http://londonist.com/
http://www.b3ta.com/
http://designmind.frogdesign.com
http://www.colourlovers.com/blog
http://www.core77.com/blog/
http://www.dezeen.com
http://www.good.is
http://www.thecoolhunter.co.uk
http://www.thedesignblog.org
Peter Schiff, who predicited the housing collapse with quite some accuracy, talking sense about how we need to sort this mess out:
This is an interesting post from Blogging Stocks. I’m pretty sure Google doesn’t have too much to worry about, but it does indicate that companies are getting more sophisticated when it comes to internet marketing:
Now, Google’s stock has sold off based on the concern that the growth in search advertising is slowing. Recent developments show that there may be more cause for concern. According to The Wall Street Journal, advertisers have started to move money to mobile platforms and social networks. The paper reports that “Pizza Hut is creating a promotion and buying ads through Facebook. While the Facebook ads aren’t technically search ads, they are part of a broader effort to boost the company’s profile in the nonpaid search results consumers get when seeking online information.”
Social networks have been criticized for not delivering results as efficiently as those from search engines, but the fact that large advertisers are moving more capital to them represents a threat to the search engine business. In a recession, any dollar that moves to a new medium is a costly defection.
