Chapter Eight Traffic Building “A wealth of information creates a poverty of attention.” ~ Herbert Simon

Value and Scarcity Online Volume of online content is growing far faster than the number of Web users

Value and Scarcity Online Volume of online content is growing far faster than the number of Web users Every site faces unique challenges to attract new visitors

Value and Scarcity Online Volume of online content is growing far faster than the number of Web users Every site faces unique challenges to attract new visitors As Web users grow more experienced, they are less likely to explore new sites

Value and Scarcity Online Volume of online content is growing far faster than the number of Web users Every site faces unique challenges to attract new visitors As Web users grow more experienced, they are less likely to explore new sites The true scarcity online: user attention

Value and Scarcity Online

Planning for Maximum Traffic Drawing more visitors to a site requires a thoughtful web traffic plan

Planning for Maximum Traffic Drawing more visitors to a site requires a thoughtful web traffic plan Web traffic plans should consider each of the five main traffic sources:

Planning for Maximum Traffic Drawing more visitors to a site requires a thoughtful web traffic plan Web traffic plans should consider each of the five main traffic sources: –Branding decisions (e.g. domain name) –Search engine marketing –Affiliate networks –Online banner advertising –Publicity and word of mouth

Planning for Valuable Traffic Effective traffic plans assess the volume and quality of traffic generated Spotting broad use patterns through visualization tools helps calculate the cost and productivity of new visits Key tool for traffic-building analysis is cost-per-action: the number of visits that end in a particular action divided by the cost of the campaign

Graphic of “Cost-Per-Action” At each stage, visitors decline and costs rise

Traffic-Building Goals Basic goal: best traffic at lowest cost But how to define best traffic?

Traffic-Building Goals Basic goal: best traffic at lowest cost But how to define best traffic? Best Traffic with Least Cost Maximum Profit Minimum Cost-per-Action Maximize Actions

Traffic-Building Goals Profit guidelines that include web site branding; ignore ad branding impact: –Spend on traffic sources that maximize difference between unified visit value and cost per visit –No ex ante spending limit or volume target –Acquire traffic as long as the cost per visit is less than the unified visit value

Traffic-Building Goals Profit guidelines that ignore branding and all other impacts: –Spend on traffic sources that maximize difference between customer lifetime value and web customer acquisition cost (i.e., customer equity) –Acquire traffic as long as online customer value exceeds acquisition cost

Minimize “Cost-Per-Action” Rejects an “open-ended” approach to traffic building and “budget-driven actions” (e.g., “Maximize action” campaigns) –Instead, sets a volume target for some action & seeks ways to achieve such an objective efficiently Number of unique new visits, New registrations, New customers, etc.

Search Engine Optimization Top placement in search returns is key to generating organic Web traffic (i.e., “Above the Fold” management)

Search Engine Optimization Top placement in search returns is key to generating organic Web traffic (i.e., “Above the Fold” management) User’s willingness to investigate falls sharply as items drop on the return list –GoogleFight.com provides a fun exampleGoogleFight.com

Search Engine Optimization Improving search engine placement –Get indexed on main search engines –Develop meta-tags & content with keywords –Structure site content & navigation to reinforce search engine algorithms –Cultivate links from appropriate sites (not “link farms”) –“link:ford.com” shows all links whereas “link:ford.com-site:ford.com” shows outside

Keyword Advertising Clickable, text-based ads bring in billions of dollars of ad revenue Ads steer traffic to an organization web site; fee charged only if click occurs Competitive bidding process determines a keyword’s value

Keyword Advertising Evaluating keyword portfolios –Identify a site’s most relevant keywords –Test and expand list, based on conversion and click- through rates

Keyword Advertising Evaluating keyword portfolios –Identify a site’s most relevant keywords –Test and expand list, based on conversion and click- through rates Bidding and tracking –Higher bids increase chance at higher keyword position –No click costs more than maximum bid –Price charged depends on intensity of competition

Keyword Advertising Max BidsActual Price Yahoo! System (0.10 minimum)

Keyword Advertising Assumptions 1.Desired action is a new customer & all customers have the same dollar value 2.Competitors’ bids are known & do not change in response to a firm’s bid 3.Ads are ranked by maximum bid (i.e., Yahoo! format) 4.Test market information showing click- through and conversion rates are known for each ad position

Step 1: Proper Keyword Positioning Cost-per-action can be found once you have the min. bid for each position and the conversion rate for each position CPA k (n) = b k (n) ÷ CR k (n) Then, knowing the “click-through”… E(π) k (n) = (V - CPA k (n) ) × CTR k (n) × CR k (n) Profit = Margin*Traffic*Conversion Rate

Step 2: Choosing Keywords Based on E(π) If the desired position is j for keyword k, then the right bid is 0 or b k (j) Rank all different keywords by CPA for the chosen position & buy following rule. Rule of Thumb: –Bid b k (n) for all keywords with a CPA k (j) < V; do not bid on the keyword otherwise.

Traffic by Association In traditional advertising, marketers put a company’s message where consumers work, live, play

Traffic by Association In traditional advertising, marketers put a company’s message where consumers work, live, play Same concept holds true online

Traffic by Association In traditional advertising, marketers put a company’s message where consumers work, live, play Same concept holds true online –Banner advertising –URL placement on shopping bags, billboards, monthly statements –Sponsorship and co-branding

Higher Click Through Has been found to correlate positively w/ –Bold colors –Top of page placement –Animation –Calls to action –limited frequency of exposure –Leader Boards over Full Banners

Purchase of a Banner Avg. click-through in 2004 for non-rich media ads was.2% (i.e.,.002) Avg. cost for a search ad in 2004 was $1.50 For price per impression to equal the price- per-click, the CPM would have to be $3 –.002 x $1.50 =.003/impression –.003 x 1000 = $3 per thousand