Jigantus.com

I recently saw statistics on sales from Amazon.com which were impressive.

Barclays analyst Doug Anmuth provides the stats:

Peak items ordered on a single day

2008: 6.3M
2007: 5.4M
2006: 4.0M
2005: 3.6M
2004: 3.6M

Items ordered per second

2008: 72.9
2007: 62.5
2006: 46.3
2005: 41
2004: 32

Peak items shipped on a single day

2008: 5.6M
2007: 3.9M
2006: 3.4M
2005: 2.7M
2004: 2M+

Amazon is a machine, with every one else slowing down, they continue the charge with sales growing year over year even in tough times. Having watched them somewhat closely, I believe there are a few reasons:

Agressive pricing - Amazon is a fierce price competitor on almost all their products. They rotate pricing up and down as they approach certain seasons to gain customers. They offer free shipping on many products which takes the guessing game out of the price when buyers compare prices and builds trust.

Service - I’ve talked about service before, but they go out of their way if there is a problem to fix it. They ship on time and provide tracking or order status details.

Selection - Buyers know that they can go to Amazon for most of the products they may happen to buy, and because they know Amazon has great prices and service, stick to the brand.

Reviews - Amazon has great product reviews, detailed descriptions so buyers don’t have to stray far to identify the product and get prices.

Resellers System - When Amazon is out of a product, they have resellers to step in. These resellers are screened and vetted, ensuring a good customer service experience.

Strategic Partners - Amazon has teamed with specialty players in specific verticals to build brand and offer specialized service and pricing. Leveraging the Amazon brand with the partner shows how influential Amazon really is.

Buyer Savvy - As buyers become more savvy to using the Internet for search and saving money, they are able to better weed out where they can find a place to buy that they trust.

There are many other things Amazon is doing, but offering what buyers want is really the key. With the recession killing sales everywhere else, Amazon grows, which means they have to be stealing business. With over $18 billion in annual sales, they certainly are on to something.

CPM advertising stands for cost per thousand ad impressions describes a type of ad where the an ad space is sold for a fixed rate over 1000 impressions.

These ads are usually presented to a general audience, not specifically targeted to a key word. For example, an advertisers banner would show when a user visited the home page of a web site. The visitor may be looking at a web site on cars and be served an ad selling travel deals.

The effectiveness of a user clicking on these ads is reduced as the ad is not highly targeted. Advertisers, depending on the ad broker, may place ads on sites that draw the most likely demographic to their product offering, but may not find the visitor in a specific mindset for the travel ad and therefore waste the impression.

The advertiser hopes that over 1000 impressions or more, a percentage of those visitors will be interested in the ad and click on it. Also, CPM ads are a great branding opportunity allowing an advertiser to get it’s name out on a mass scale.

CPM ads are usually cheaper then more targeted ads, allowing the advertiser to spread its message accross a broad spectrum.

Unless you have a massive budget or a large brand to build or maintain, CPM ads are not for most businesses.

In Lesson 1 I will describe the basics of CPC from a new advertisers perspective, how does it work, where do I start?

Cost Per Click (CPC), also known as Pay Per Click (PPC) marketing describes a method of advertising on the web where you pay only for “clicks” you get to your web site. The amount you pay per click is determined by a number of factors. Whether it is successful or not is also determined by your offering. I’ve spent millions on CPC ads, so I have learned a few things that I will pass on to you.

So how does it work? CPC advertising is structured on a bidding system, meaning you bid for specific key words that you want to target. For example, an advertiser who sells “digital cameras” can bid on that key word. When someone clicks on your ad and goes to your web site, you pay for that click.

CPC advertising allows you to highly target the audience you want , even geographically. The theory is, only someone who is looking for a digital camera would type the word in and therefore be someone you want to show your web site to in hopes that they visit your store and eventually buy, or in a local case a hope to visit the store or call.

This differs from the CPM (Cost Per Thousand) newspaper style model, where you buy an ad for a fixed price and hope that its designed well enough that people click on it or read it. This ad is usually served to a general audience, not targeted by key word, so they are less likely to click on your ad.

The CPC model has become extremely popular for advertising on the Internet, as it produces a highly targeted visitor to the site that you only pay for when they do. The main advertisers that offer this are:

Google Ad Words

Yahoo Search Marketing

Microsoft Advertising

Google is the biggest followed by Yahoo and MSN. In fact, I would say Google has more volume in ads then Yahoo and MSN combined at the time of this article.

So you want to try? What do you do?

1. Set up an account with one or all. If you are starting, just pick one.
2. Determine where you want to advertise. What countries do you ship too? If you only sell local, you don’t want to advertise around the country, otherwise your ads will be clicked on by people who you can’t sell too. 
3. Determine the key words you want to bid on. I would recommend you to start with the most competitive products you sell, or the strongest part of your business. CPC ads do not just have to be product based, you can advertise a service as well. All the ad systems have a key word tool that will help you identify relevant key words. A tip here is to keep the words more specific. For example, if you select “digital cameras” you will be paying a fortune for this word, as there is a lot of competition and searches done for this term. However, if you select “Panasonic Lumix” you will get a more targeted buyer and a higher conversion rate.
4. Determine where you want to link to. Once the user clicks on your ad, where does the link go? Linking to a relevant page would be ideal. Don’t link to your home page when you can link direct to the Panasonic Lumix camera page, you’ll get better results.
5. Bid. The higher you bid, the higher your ad gets placed. If you bid really high, you will be at the very top. But be careful, you will also get the most clicks.
6. Set the budget. If you are experimenting, make sure this stops you from getting into trouble. If you don’t know what you are doing, you could end up spending a fortune before you know what happened. Set a monthly budget (NOT daily), so you don’t exceed the money you’ve put aside, you can always increase it, but not decrease. Get you feet wet first. Daily budget’s are in some cases really just a monthly budget, so if you set your daily budget at $30, it is really $30 x 30 days = $900. Your spend could reach $900 in ONE DAY!!! So watch out.
7. Determine time of day. Ads can be targeted by time of day (not in all systems). This is useful as you don’t always want to display ads when you are not there to answer questions. This could result in you loosing the customer.
8. Start small, keep it simple. Master the basics, learn the system, there is plenty of time to expand. If you don’t, you could bite off more then you can chew. Also, keep experimenting, most people don’t get it right the first time.

These are the basic minimums. I could go on all day about other things related to CPC. Your page, web site design and policies also have a large influence on your success but this will have to do for now. Stay tuned for more.  

CPC advertising is a highly competitive game, with lots of competition, veterans have a vested interested in keeping newbies away, after all it eats into their bottom line. There are cons to this system as well, but if you want quick targeted traffic at a controlled budget, there are not many other choices you ha

I have been running e-commerce sites for a number of years and have been fortunate enough to have done well. In each of my businesses, right from the start, we have been positive cash flow where most businesses loose money in the first year.

Of course you have to lay out some money and time to get these up and running, but once the ads go out and the site goes live, I was making money. As you can imagine this is a HUGE help to any  business. No need to lay out large sums of cash when you aren’t sure if your concept will work, it takes a lot of stress out of things and allows you to focus on making your offering even better.

Some of my success has to do with the following approach:

Design a scalable business - By putting certain components in place that can adjust to sales in correlation with cost, a business can adjust costs to scale to good times or bad (due to seasonal or economic influences (recession)). These can include things like establishing contracts based on volume with critical suppliers. In down times, this can save you a lot of money and keep you in the game for the long run. At all times, keep your costs low. This is ultimately where the buck stops. Look at all the recent lay offs at high tech start ups trying to extend their lives.

Market right the first time - Jumping out of the gate with the right business model that is strategically priced gives you instant appeal to your customer and a reason for them to try you. This means knowing your competitors and the market habits of the customers you are trying to draw.

Be creative - Offer something unique that differentiates you from the others, better return policies, draws or something else that might appeal to your demographic. (Zappos.com offers free overnight shipping and liberal return policies).

Anticipate - If your company begins to make progress,  anticipate what the competition or the market will do. If you are a success, they will hear about it and react. In both my e-commerce sites that is just what they did. You may start with an edge, but how do you keep it?

In addition, your competitors are restricted by certain parameters which they may or may not be able to change easily. For example, if they are a very large, they will have trouble changing, they may have old technology not easily changed.

Listen to your customer - No matter what, you will get some customers if you market correctly. Once you’ve started, you will earn a lot from your customer, listen to them, learn their pain and develop the solution. This is your bread and butter.

Leverage technology - Wherever you can, technology can allow you to be much larger and more powerful then a traditional business could ever be.

There are still other ingredients to success like marketing efficiently, logistics etc, but the core ideas that I try to follow are above.

When we launch Jigantus.com we will be trying to find a way to do all these things.

So you’ve decided to set up an e-commerce site?

I’ve run a few e-commerce sites of my own, and years ago used to help others to do so. When the Internet started, we charged clients $25,000 minimum to build a site, which was cheap at that time. The back end of the system would be sparse and clunky, but get the job done.

Nowadays, starting an e-commerce site is very easy. If you have a product, you can get up and running in no time. Many software companies offer template e-commerce web sites for very little money usually charged on a monthly basis with no contract required. You can even get a free trial from many of them.

Don’t underestimate the power of these sites. They can handle hundreds of transactions per day and millions in sales with no trouble, I’ve done it. No need to get too fancy unless you are already making millions in profit, in which case you may want something more custom.

The back end features offered are extremely powerful and allow the seller to manage many key functions including:

• tax
• shipping
• customer relationship management
• email marketing
• inventory management
• SEO
• affiliate programs
• coupons
• gift certificates
• automated email response
• customer invoicing
• and more

These features are all easy to use with self service tools that are already set up when you start. You can choose from template designs or have a custom design done by you or by the software provider for an extra fee.

There are also sites that offer template graphic design for very little money like www.templatemonster.com.

Template e-commerce sites can start from as little as $10 per month but allow you to only list a few items. Higher end systems without limit can go up to $150 per month depending on who you go with.

SOME are listed below,

• www.volusion.com
• www.3dcart.com
• http://smallbusiness.yahoo.com/ecommerce/ (Yahoo web store)
• http://www.amazonservices.com/content/webstore-by-amazon.htm?id=hm1 (Amazon web store)

But if you can search the web for many others:

• e-commerce web site
• e-commerce hosting
• e-commerce software
• e-commerce store

Once you select your e-commerce site you will need a merchant account to accept Visa, MasterCard, Discover or American Express. Most banks will have an arm that offers this or go to the web and search “merchant accounts”. You will end up paying a higher rate then a face to face business because of the fraud risk factor of online transactions, but should have no trouble.

Once you get this done, you simply plug in a simple number they give you into the back end of your e-commerce store and you are ready to conduct transactions.

If you want to speed up the process you can sign up for Paypal or Amazon Payments. Both offer easy integration into the site with very little set up barrier. These services are not as elegant and can cost more, so if you can, set up an e-commerce merchant account.

It will take some knowledge of computers and you will have to invest the time into understanding how to load products, manage sales and use the system to execute orders etc. , but it can’t get much easier then it is today.

So should you start an e-commerce site? That’s a future article

Yahoo recently announced that they will be closing Brickhouse by the end of the year.

http://www.crunchbase.com/product/yahoo-brickhouse

Brickhouse is a division of Yahoo where approx 4-6 people work for 4-6 months on a short term project, hoping to create something new and exciting.

Obviously, it didn’t prove it’s value. Yes was a good idea in “theory” but it is often difficult to force something to happen, vs letting it happen.

Ideas  just strike you, and there are a lot of lightening strikes that hit everyone. Usually it has to do with an experience that happens to them and in turn they come up with a solution.

Whether it succeeds or not depends on the persons execution, and other business factors such as, is it big enough, timing, competition etc.

Innovation comes from everywhere and people of all different skills and backgrounds. Many don’t make it for various reasons but the key is, people try. Something is bound to work its way to the top. These become companies like Facebook, Myspace, Craigslist, Youtube and Twitter to name a few.

VC’s “spray and pray” and hope that an idea that sounds good, will make it. So home growing your own, is difficult.

I like the competition aspect that Amazon and Facebook took.

Facebook created fbFund, a $10M seed fund focused on enabling innovative and engaging applications on Facebook Platform.

http://www.facebook.com/pages/fbFund/40962810690

“We provide the following benefits:
* Funding: Receive $25k-$250k non-recourse grants
* Mentorship: Learn best practices and receive valuable feedback from Facebook engineers and other fbFund developers. Get immeasurable benefits that come with introductions to potential investors.
* Marketing: Receive press attention at f8 and Facebook Developer events.”

This competition just recently closed and it resulted in a number of innovative ideas for Facebook. The money provided incentive to build something (building things are cheaper these days) and gave Facebook users more applications to play with. Making the Facebook experience better for its users is key to growing and maintaining interest.

In the case of Amazon, they recently closed a similar competition for companies using their development products/services. http://aws.amazon.com/

In both cases, great ideas developed, the best rose to the top.

The next big thing is coming, from where or what this will be we’re not exactly sure, but it will. You can’t develop innovation, it just happens.

In a recent Techcrunch article, they talk about Ask.com (in their experimental search) displaying a disproportionate number of ads when a term is searched.

http://www.techcrunch.com/2008/12/09/askcom-search-is-effectively-nothing-more-than-an-ad-engine/

They also point out that “Ask pulls other tricks as well, like making the entire horizontal space next to an advertisement clickable on the ad, which makes mistaken clicks happen quite easily as you are trying to scroll down.”

Showing more ads and “tricking” customers a sign of desperation. Customers want organic search with honest results, if a FEW ads are around that compliment what the user is looking for, then fair enough.

When it gets lopsided like this, it’s time to rethink the business, not trick customers.

In the spring of this year, I received an e-mail from Shopping.com advising advertisers that they had modified their algorithm to adjust ad spending. Basically, the system would analyze conversion rates for products and give back advertisers some money based on a set formula. They call it Value-Based Pricing(VBP), here is an excerpt:

“We have recognized that not all clicks convert equally and as a solution we implemented a value-based marketplace pricing model – Value-Based Pricing (VBP).   With this system, our partner team proactively adjusts the charges per click to you by rating the partner against a standard model.  From rating all of our partners’ performance against a standard model, they created a scoring system that accurately and quickly communicates a partner’s performance in terms of average cost of sale and conversion to sale of their overall traffic performance.” 

What this meant to me was, advertisers were spending too much money for their ROI (return on investment) and were loosing. Shopping.com realized this and tried to adjust.

Also, in lead up to the Christmas rush, Shopping.com sent another e-mail advising their minimum bid rates would drop by 15% in an effort to attract more sellers. In previous years, minimum bid rates were raised in an effort to generate additional revenue during the holiday shopping season. Here is an excerpt from this email:

“Effective November 15, 2008 through December 31, 2008 we will decrease the standard CPCs in over 25 categories by 15%!  The 15% decrease will be applied in top holiday categories and sub-categories such as GPS devices, MP3 players, video games, flat panel televisions and musical instruments. ”

Both of these changes by Shopping.com tell me they are having trouble keeping sellers happy on their site. Sellers are only happy if they have a good ROI, or at least even a break even. Based on CPC (Cost Per Click) problems, sites like Shopping.com, Google, Yahoo, MSN loose advertisers because the ad spend is too high vs. the conversion rate. 

As Jigantus.com keeps saying, the “Internet Marketing Model Is About To Change,”  we intend to change it.

I just read an article that says Yahoo will offer Abstracts of Search sometime next year.

What they plan to do is offer a summary of a web page with the link, rather then just links. It is an automated system that extracts key data they think the user is looking for. It will make filtration of the results better for the user.

This sounds like exciting technology, people are essentially lazy so they want faster quality results. That is why Google has done so well.

It’s a big job they are undertaking, so I wish them luck, Google needs a strong competitor while Yahoo needs to improve their search.

Not really, but in an earlier post, I mentioned that Youtube.com was allowing sponsored video ads on its network but there was a concern about sexually explicit videos showing up.

Youtube just recently announced they will be cleaning up content to filter out this problem.

http://www.youtube.com/blog?entry=AEX3_7h40mk

This is a good thing as we don’t want our kids happening into the wrong video. Also, these types of videos would be considered spam, which none if us want. There are other ways to search for sexually explicit material, we don’t need it on a family site.

Hopefully the video filter technology does it’s job!