Perry Marshall on Search Industry

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Q: Thank you for taking time to talk to us, Perry. Can you tell us a bit about yourself? How did you get involved with the search engine industry?

A: I got in on the ground floor barely a month after Google first introduced their new AdWords pay-per-click program. Back then it was still uncharted, Wild West territory –the clicks were inexpensive, and nobody really understood it. As I started buying traffic to promote what at the time was my own budding consulting business, I was struck with how there is almost an infinite amount of niches that can be accessed using Google and pay-per-click. Even more important than that was the fact that Google made is so incredibly simple and easy to split test more than one ad, and over time increase your clicks and traffic. It was the fastest-ever crash course in basic direct marketing principles.

It didn’t take long for a simple set of guidelines to emerge: certain types of ad copy invariably worked better than others, certain positions on the page were more profitable than others, and age-old marketing principles showed up yet again even in this brand-new advertising medium.

So when the ground rules became clear to me, I sat down and wrote the very first edition of my Definitive Guide to Google AdWords, and it took off from there. Since then my associates and I have managed and consulted in almost every market and industry you can imagine, and we find again and again that the same common-sense principles apply no matter who you’re advertising to, or where.

I’m pigeonholed as the ‘Google AdWords Guy’, which is fine. I’ve got no problem with that, but I was doing all kinds of things as a marketer long before AdWords came along. I’ve done magazine publicity, direct mail, print advertising, white papers, sales through public speaking, email marketing, all kinds of stuff. In fact, I’d say my ability to write copy and use email in particular are just as important to my own success as Google AdWords expertise.

Q: We all know that the search engine industry is changing rapidly. Many say we are witnessing the second dot-com boom brought about by such Internet giants as Google. What are your thoughts on the state of the search engine industry?

A: There’s a winner-take-all phenomenon at work here, which has been slowly fleshing itself out ever since the Internet entered mainstream life. In the early days, there were umpteen bazillion different search engines you could go to and use, just like there were umpteen bazillion different online auction sites. But eventually the masses discovered a small handful that were more user-friendly and had more options and offered better quality than the others. So the crowds converged on them, and the playing field narrowed. That’s how eBay became the number-one auction site. And it’s how Google, Yahoo!, and MSN eventually took over the search engine world.

Now the Big Three are battling it out, and it’s probably a safe bet that none of the three, including Google, will ever completely “take over the world,” any more so than GM or Ford could ever succeed in completely taking over the American auto industry, or ABC or CBS could monopolize prime-time television.

What I do know is that as long as Google continues to make everything they touch so simple and uncomplicated, the other guys will always be playing catch-up.

Is there a bit of a “boom” going on? Yes, I think so, and maybe even a bit of bubble behavior. What’s important for real-world marketers is to not just build businesses that make all the profit from the first sale, because that is only going to get harder. The “big three” in any industry or niche will be the ones who go deep and sell to the same customers again and again.

Q: In the last couple of years we have seen a tremendous increase in the amount of competition in both natural and paid search results. For most major key phrases competition has tripled if not quadrupled. Smaller companies have been slowly but systematically pushed out by their larger competitors in both natural and pay-per-click search results. What would your recommendations be for the little guys?

A: There will always be a place for the little guys. That is, if they’re willing to niche themselves, and specialize, they’ll always have their market.

To use a specific example from the online auction world, if you’re looking for an inexpensive, used Yamaha stereo receiver for your living room, everybody knows you can jump on eBay and find a dozen of them for sale online right now. But there are folks with more exacting tastes than that – for example, the guy who’s looking for a $20,000 gold-plated mono tube amplifier for his home music system, who knows that eBay’s selection is far too pedestrian for what he needs. So he’s going to go to a more specialized auction site, such as Audiogon.com, where he’ll be able to find several models of what he’s looking for.

In other words, there’s always a market for specialists off the beaten path of the middling mainstream. There will always be a market for Bentleys and Rolls Royces that Cadillac and Lincoln-Mercury will never be able to touch.

Another example would be the companies you see when you search “cosmetics.” For the most part you do not see the department store makeup counter good-ol’-boy club. You see a dozen players whose competence is online marketing.

The folks who know how to specialize and cater to smaller niches can stay alive, even when the market is dominated by giants. They may never become billionaires, but they’ll be able to stay in business – and in some cases build very healthy, profitable businesses – by meeting the special needs of the few rather than the average needs of the many.

Q: Many experts believe that there is a monopolization of the Internet search industry going on. There has been a lot of talk that if web search is taken over by a few large corporations, it will cease to be the free and open medium it once was. What are your thoughts on that?

A: There’s an old adage in business that one is always a bad, bad number. If you have only one advertising medium, you’re toast if it gets shut down. If you have only one means to communicate with your customers, you’re in serious trouble if it suddenly goes away. And for consumers like you and me, if there’s only one company monopolizing the sales of a certain product we like, we know we’re being overcharged and getting lower quality than we could otherwise.

At this point, even though I frankly think that Google is a far superior pay-per-click service than Yahoo!/Overture, the reasonable quality of other organic search engines is probably keeping Google from running the table, but it’s not keeping Google from making the fastest fortune in the history of business.

Either way, as long as there’s a viable competitive alternative someplace else, no one service is going to get a chokehold on the world’s markets! With MSN entering the pay-per-click game soon, healthy competition will keep the likes of Google in check.

I do think it’s probably a good idea to look at Google with a jaundiced eye. Remember, they don’t send me checks every month, even though I’ve helped them make hundreds of millions of dollars. I only make money serving my own customers. And my advice is this: if you’re getting most of your traffic from them, I think you might be letting the fox in the henhouse if you rely on their tools for traffic conversion and website stats (i.e., Google Analytics). Don’t be complacent, because you could wake up one day and find you’re wrapped around their finger.

Also, 90% of skilled online marketers are totally ignoring offline advertising opportunities, like print advertising and direct mail. No matter what Google does today or tomorrow or next year, a guy in a blue and grey uniform is going to walk up to your house and put a bunch of envelopes and flyers in your mailbox. That guy is a very effective salesman with the right kind of letter in his hand, delivered to the right kind of person.

Q: Microsoft is entering the paid search results arena with their new Microsoft adCenter pay-per-click platform. How will this move impact the search industry?

A: I’ll be pleasantly surprised if their platform is as user-friendly and robust as Google AdWords, but I welcome the competition with open arms. It will keep the wizards in Mountain View more honest, and it will be another viable advertising venue for all of us who are selling our products and services online.

At this point I’m not sure MSN really knows what they’re doing, but I really do hope they do a killer job with this. I hope they knock Yahoo!/Overture on their butts and really deliver a high-performance product. Right now they’ve only got 12% of the search market, but let’s hope Bill Gates and Steve Ballmer and all those guys over there keep it simple and grab the bull by the horns. The world needs a good alternative to Google.

Q: While the “Big Three” of the search industry are battling it out among themselves, second tier pay-per-click search engines seem to be losing their competitive edge. In your expert opinion, do the smaller pay-per-click search engines have a chance to survive?

A: Websites and search engines that are able to specialize and serve an untapped niche in the market will always have a place. However, they’re not going to be all that useful for most people. Yes, the Internet is wide open and anybody can set up any service they want to, but Internet search is a huge undertaking. The Internet is so big now, you need billions of dollars just to build enough infrastructure to search it.

Q: Lately, Google started expanding its range of services into the territories of companies like eBay and Craigslist.org. Do you think that Google’s quest to organize the world’s data can be achieved without taking over industries like online auctions and classifieds? Do you think Google’s actions are setting a trend for others to follow?

I don’t see Google as setting a trend; instead I see Google as simply following a trend, or a principle, that far predates the Internet: prove yourself again and again to be the easiest one in the crowd to do business with, and people will flock to you.

Remember, old habits die hard. When it’s a no-brainer for the majority of people to go to eBay to find stuff they need, the masses will move slowly, very slowly. And the underlying principle of the power of a network is that if the members double, the networking opportunities in it actually quadruple. That fact will make it hard (maybe even impossible) for Google to unseat eBay or businesses like it any time in the near future.

Still, what Google does so expertly well is to make it easy and painless for you to use them and all their services. They’re still just a white page with a simple search box.

To the degree that the world understands and appreciates what Google does so well – namely simplicity – to that degree other industries are going to learn to follow suit. Sadly, though, the world will always be full of folks – and far too many – who only know how to make things complicated!

Q: Top search engines are now competing to bring mobility and a range of other services to the consumer. How can businesses advertising with those search engines benefit from extended range of services offered to the user?

A: Now people don’t just find you in the search listings; they can find you in the auctions, in the video archives, on the news; and even on some arcane satellite photo with your street address attached. The more places people can find you, the better off you’ll be. The more media you appear in, the more people will find you. And again, let me emphasize the importance of serving and communicating with your customers before and after they buy, through whatever channels are available to you. Offline and non-Internet channels are still important. With all the sophistication the Internet offers, don’t overlook those other methods. Take what works online and make it work even better with things offline.

About the Author

Andrey Milyan was the first editor-in-chief of Search Marketing Standard, the leading print publication covering the search marketing industry. He has been following and reporting on industry developments for over 10 years. Andrey now works in the paid search sector of a prominent search marketing agency.