Google CEO Dominates Day Three at SES

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Google CEO Eric Schmidt Speaks Out

Wednesday’s Search Engine Strategies Conference kicked off with a keynote discussion between Danny Sullivan and Eric Schmidt, CEO of Google. While the tone and content of the discussion was largely high level, feel-good in nature, it was an opportunity to see Schmidt in his element. The SES crowd is a relatively new audience for him and quite different than the typical investors, analysts and strategic partners he typically deals with. It showed in the frequent disclaimers made as part of his responses to questions. He earns the big bucks because he has to constantly walk a tightrope…giving enough information to satiate the audience, without upsetting the lawyers or PR flacks. After the session, I had the opportunity to sit in on a press conference. The highlights from the 2 hours of discussion include the following:

  • Much of the advancements in Internet technology and integration has been made possible by advertising revenues
  • Schmidt is very excited and optimistic about the launch of the MySpace, radio and video ad network products rolling out in the coming months, despite criticism of the flailing Google Print product.
  • As far as enhancing the search experience, Schmidt mentioned iGoogle, as a great way to create a multimedia desktop search experience, complete with gadgets ala PointCast. He also mentioned that Google search will be more embedded in other sites and applications (ala MySpace) in new and interesting ways.
  • Schmidt has elected not to be part of the select team of Google engineers that know the inner-workings of the Google algorithm.
  • When it comes to developing new products, the litmus test is whether or not it will solve a problem and enhance the search experience. Once a product gains traction, it then becomes integrated into the Google user experience.
  • When it comes to evolving products, financial models are less important than solving real search problems, according to Schmidt.
  • Google is a big supporter of Internet neutrality and open standards (i.e. Google Talk platform) as it enables rapid adoption and greater usage of Google products.
  • Google’s priority for the near future is to implement all the deals that have rolled out in recent weeks, rather than making more deals.
  • When it came to questions about competitors like eBay, MSN and Yahoo!, Schmidt responded that this is an immature market with room to grow, and that competition is beneficial to consumers as it raises the bar and everyone wins.
  • In terms of exciting cultural changes due to Internet adoption, Schmidt is most excited about social media as an online lifestyle.

Pricing and Contracts for the Small SEM Shop

Due to scheduling, I was only able to make it to one other session on Wednesday, which was of great personal interest to me: client contracts for SEM shops. I found this session to be one of the most informative and interesting thus far, perhaps because I’m in the midst of fine-tuning Anvil’s client contract. Ken Jurina with Epiar outlined the ideal client: mid-sized companies have the budget and resources without being unresponsive like larger companies. He also suggested shorter proposals (5 to 7 pages) instead of longer versions that can be overwhelming and distracting. Todd Friesen with Range Online Media (formerly an SEM consultant), offered a variety of valuable suggestions for contract structure and content, including the following tips:

  • Contract deal breakers: indemnification and confidentiality (2 way), termination length (2 weeks), intellectual property (retain ownership), dispute resolution (local venue) and guarantees (none).
  • Performance-based contracts: establish baseline, work off gross adjusted revenue (not net profit), set 2 to 5 year duration (with automatic renewal based on performance) and provide an easy out for the client based on non-performance.

Jesse Stricchiola with Alchemist Media Inc. provided input on the client engagement. She suggested that pre-screening clients is critical in ensuring a successful long-term relationship. Asking the right questions is critical: previous SEM experience/engagements, internal resources (roles, responsibilities and availability) and accounting process/terms. Once a client is on board, Stricchiola suggested setting expectations in terms of scope, risks and influencing factors. Finally, advice on long term success factors: understand internal client politics and agendas, egos and overall cultural fit. Greg Boser with WebGuerilla LLC rounded out the discussion with a discussion about performance-based pricing. Boser was open and honest about his trial and error experience in fine-tuning compensation models and contracts. Specifically, the panel agreed on the following issues:

  • Non-competes beyond the engagement period should cost extra due to potential loss of revenue
  • Performance-based compensation should be based on lift (delta between current revenue and potential revenue) and range from 4 to 35 percent for ecommerce clients.
  • Contract lengths should range from 2 to 5 years; the longer contracts being required for ecommerce clients
  • Focus on the impact SEM can have on the bottom line and you will get the business.

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