Understanding the Economics of SEO March 5th, 2010
by Peter Melnikov

seo_vs_ppcLots of businesses successfully leverage SEO (Search Engine Optimization). Compared to other marketing activities SEO is cost-effective and measurable. Attach Google Analytics or other analytics tool to the web site and you get a good understanding of how the marketing budget is spent. Visits, time on page, forms filled and products purchased, you can track it all and more. The value of an SEO campaign may already be determined based on these data. That’s what marketing managers or business owners should do. Additionally, and most importantly, you should compare to the competition to make sure that campaign is doing well. Luckily there is a way to do so by comparing ROI on SEO budgets with alternative ROI you can get on the same budgets potentially spent on PPC.

Some explanation for non-seo folks: PPC (Pay Per Click) allows you to immediately run ads displayed on selected keyword searches but lasts only while you pay. SEO is more of a long-term investment. You hire an SEO agency and invest for some time by paying their retainer fees unless the web site shows up high enough in search engines to cover SEO bills and ultimately bring solid ROI. There is always an option to invest $5,000/month in PPC and get 1,000 visitors to the site (figures vary depending on the cost per click) or hire a SEO agency for $2,000 and get same 1,000 visits half a year after they start working, or 10,000 visits or 100. That’s all about numbers (read economics).

The economics of SEO is very simple yet fundamental. Here is an example:

Say a client engaged an SEO agency to promote his/her web site. After 6 months of work on the site the SEO agency got to the point when it’s delivering 5,000 visits to the web site per month. The monthly bill from the agency is $2,000. Now check the cost of traffic for those particular industry keywords in Google AdWords. Say it is $5 per click. That means if you were to purchase those 5,000 visits you would be paying $25,000 per month. Granted $2,000 monthly bill from the agency is a very cost-effective marketing.

Change numbers a little bit and you will understand why so many SEO agencies don’t deliver or the contracts get terminated. Say the agency delivers 2,000 visits to the site monthly but the industry is not that competitive. Cost per click in Google AdWords is $0.5 for that particular industry. It means that client could purchase the same number of visits for $1,000, risk-free, no investment. But the $2,000 monthly bill becomes unreasonable.

As you see, this is a very simple yet effective method. Two cooperating parties may quickly determine if their cooperation is beneficial. In order to determine the efficiency of an individual SEO campaign, SEO agencies or their customers have to multiply the number of visits delivered from search engines to the site by the average cost-per-click, which is common for a particular industry. If the ROI on SEO is at least 2 fold more than that of a PPC campaign then everyone may be sure that this contract is mutually beneficial and will last long. Otherwise there is no point in SEO because the client could purchase traffic from Google avoiding making and investment and taking a risk.

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Apple App Store. Mobile industry before and after. Part IV Future March 4th, 2010
by dmitry

Is the future of mobile industry vague? Not at all! It’s likely to be the best future the whole mobile industry could ever count on – all due to an App phone. Being a new concept in 2007, it is now a great handheld device everybody is used to. Users expand their phone productivity and functionality by installing apps they need and customizing the device to their taste. Got phone, got apps – you’re good to go. Apple saved the industry from downfall by giving a hope for both customers and developers, who now fully focus their attention on iPhone development. The whole market at its current state, actually, was created and brought up by Apple. The new player turned into winner by broadening the choice for customers and giving opportunities for developers.

No matter where you go, you now have great openings in front of you. Some developers are seduced by Android because it’s open and they can literally do whatever they want. Besides, it’s free and highly customizable resulting from the first killer factor. And, of course, there’s an app store called Android Market. Operators love it as they can enhance its particular features they find important, e.g. messaging, internet services, UI improvements, etc. But what can happen if everybody wants to add something original and make the OS look different from the original Android based OS. It’s going to get fragmented and an app working perfectly on your device will not work the same way on your friend’s handset or won’t run at all. The apps would need to be tweaked according to device specs. Big challenges are inevitable. Let’s hope there’ll be a solution not involving patent infringements.

Android is going to be very popular as this platform is spinning up. Apple will be holding industry leadership for quite a long time but the market share is going to change. Everybody is waiting for iPhone OS 4.0 and discussing the new device – iPad, another prospective platform for developers. With full multitasking support and packed up in new hardware with tuned software on top, the next Apple mobile device will probably be a hit again. We’ll see it in the near future.

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Apple App Store. Mobile industry before and after. Part III Competitors March 4th, 2010
by dmitry

Inspired by Apple’s astonishing profits other phone makers decided to… Guess what? To come up with something unseen before? Nothing of the kind! Copying with pride was a new strategy elaborated by handset manufacturers. Before Apple, no one really believed in touch phone concepts. But after the apparent success of the iPhone they all went ‘we got touch screens, too!’ Moreover, they start launching their own App Stores ignoring the fact that they might not work for numerous phone models of a single manufacturer.

Anyways, Nokia is launching Ovi Store, Palm is also launching its store and a new phone Palm Pre. Predictably, they haven’t come even close to Apple’s results. iPhone-like devices are produced everywhere.

RIM is gathering pace as its products become more popular worldwide and these guys are working really hard on implementing its proper inventions in their handsets. For example, the SurePress feature, intended to provide users with the most familiar feel they had with their former, physical keyboard equipped devices. It actually gives you a sort of a feedback after touching the screen, which is very nice in terms of typing and tapping.

Even Google is taking the plunge and releases Android mobile OS along with its new phone – Nexus One. This is not just a hardware specific OS conceived for a proprietary device, this is an open platform offered by Google for phone manufacturers as a way to get a new refreshing experience, since they’ve been using same mobile software for a very long time. New products by HTC even feature multitouch (a bunch of the latest handsets use this technology), though there’s going to be patent infringement handlings since Apple sued HTC for stealing their IP.

What about Microsoft? It’s absolutely no doubt that it’s high time to get back to mobile business with fresh ideas. These guys have been working hard and came up with something really impressive – Windows Phone 7, a turning point in Windows Mobile history. Photocopiers? Not at this time! When developing its new product Microsoft focused on multitasking which is either blocked or only partially implemented on some devices due to battery life issues and performance lags. How is it going to work under the new OS? More questions than answers, actually. But one thing is clear – Microsoft is back in the game. Anyway, competition always does good and new ideas are always welcome.

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Apple App Store. Mobile industry before and after. Part II Recipe for success March 2nd, 2010
by dmitry

Revealing a new product is an important step. The most difficult about it is to make it appealing to customers and software developers. The former will be lured by the attractive design and impressive functionality but you will definitely need something more convincing for the latter. Here you go: Software Development Kit for iPhone, which was intentionally designed for developers who glimpse great opportunities in the new device. What is it? SDK is a complete set of developer tools aimed at redefining the whole experience developers have had before. And this is not the whole story! Ok, the app is designed, debugged and ready for launch and therefore for sale. What’s then? Selling apps on mobile operators’ online stores? No way, you deserve a better place for your masterpiece! Welcome to the App Store – a dream come true for every developer wishing to be able to sell apps online and in one well organized place. App Store made it much easier for the end users, too. Just launch iTunes, go to the App Store and browse through multiple categories of apps. The same works for iPhone. Now users have literally every application available in their pocket!

The number of apps available for the iPhone skyrocketed within a few months after the introduction of the above mentioned innovations. Now the App Store counts more than 150,000 titles ready for download. And this number is growing. This is actually the best example of entrepreneurship in modern mobile history led by the supreme commander Steve Jobs. It’s no doubt that the recipe for success is making risky decisions and eventually turning them into great achievements. Prefer something more conservative? Then you’re off the track!

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