Branded Search – Thine Friend, Thine Enemy

Once upon a time I didn’t know what “branded search” meant.  I would have assumed it referred to people searching for a particular brand of product like Nike they could buy at a retailer like Amazon; searches like “nike shoes”, not searches like “Amazon”.  Of course, branded search actually refers to your own brand.  “Nike shoes” is a non-branded term, unless you’re Nike.  Who knew.  A bit of a misleading label in my opinion.

The reason I didn’t know what branded search meant was because up to that point my e-commerce experience was from the perspective of a startup.  When you’re doing less than $10 million in revenue, you generally don’t have a “brand”, and certainly don’t think of yourself that way.  Do you buy Google searches for your own site’s name?  Of course you do.  They convert great, don’t cost a lot, and there are few people searching for you anyway.  Life as a non-brand often means doing battle in Google for every order.  If you were to turn off your advertising, your sales would immediately fall to near zero.

For startups and small online businesses, a pie chart of what traffic sources produce orders, looks something like this:

80% Non-Branded Traffic, 20% Branded Traffic

Now that I manage the online business for a very large, very old, publicly traded company with a large number of physical stores across the country, of course this is where I become acquainted with the term “branded search”.  From the perspective of a startup, you always look at the big brands and wonder things like what their conversion rates are like, how they get their traffic and why they’re so successful.  Well kids, having seen what’s behind this curtain I can tell you there’s nothing to be impressed with.

If you ever looked at the Alexa rating of a huge brick and mortar incumbent in your industry and wondered how they get all that traffic, allow me to demystify it for you – almost all their traffic comes effortlessly as a result of being an established brand with physical stores that people drive by and shop at every day.

They don’t know something you don’t.  They’re not raking in orders via social media.  They aren’t crazy good at paid search, and their conversion rate is probably worse than yours.  They get this traffic automatically just because of who they are.  Even the natural search traffic they get is by far more as a result of Google viewing them as a brand rather than the content being fantastic or really well tuned for SEO.  For large multichannel retailers, the pie chart of the traffic sources that produce orders generally looks something like this:

20% Non-Branded Traffic, 80% Branded Traffic

The problem is most big brands aren’t looking at their world that way.  They might list orders by traffic source, which will make it appear that Natural Search and Paid Search are very large buckets of where their business comes from.

When people hear “paid search”, they generally think of all the searches for products, not the searches for your own company’s brand name.  I think many would be shocked to learn just how much of that is really people just looking you up in the white pages.

If you pick up the phone book and go right to the white pages to find “Bob the Plumber”, this means you’ve pretty much already decided to do business with Bob.  Obviously once you connect your call there is going go be a high conversion rate.  If on the other hand you go to the yellow pages and look in the plumbers section, you may call several plumbers before deciding to do business with one.  However if you’re Bob the plumber and that customer didn’t know you, they may have only found out about you from your listing in the yellow pages.  It’s expensive but it can be very effective, which is why you pay for it.

Online, big brands get most of their orders from the white pages (branded search), which is cheap and converts very well.  They are also spending a boat load of money to be in the yellow pages but often don’t realize how much they’re spending to acquire customers there because the paid search dollars are actually spending on both the yellow pages and a double listing in the white pages (buying your own brand name in paid search).  The results are often reported mixed together since it is all paid search spend.  The yellow pages are really expensive and not performing super great but the double listing in the white pages delivers and more than makes up the difference.  Typically marketing reports lump all paid search (branded and non-branded) together so it appears as though paid search is really effective and is a huge driver of your business.  Be mindful that this is what Google wants you to believe (keeps you sending huge gobs of money their way), and also what your agency wants you to believe (it makes their job a lot easier and keeps money flowing their way too).

I consider people searching for your core brand equivalent to direct type-in traffic. Meaning someone searching Google for “kohls” is equivalent to typing kohls.com directly into your browser.  Same intention.  Many people forget to put the .com and the browser performs a search, other people just search for everything.  But the intention behind the act is the same.  So when I say “branded search” I’m referring to both, essentially people who were already looking for you and intended to come straight to you.  And yes I include any branded variants (“kohls clothing”) as well as core brand (“kohls”).  Just because people may believe they’ll be able to navigate your site better using Google doesn’t mean the intention wasn’t to go directly to your site.

For many multichannel retailers, if they had to rely on profitably acquiring new online customers who weren’t already looking for them, they would go bankrupt.  Many multichannel retailers online business doesn’t have real P&L accountability, and many aren’t even using a shadow P&L.  They may fancy themselves as profitable largely because they don’t understand branded traffic.  This seems funny to me that the big brands don’t understand the pros and cons of branded search in online business.  I think it’s because when you experience life without the benefit of branded search, you recognize it right away when you see it, and you can appreciate the benefit, the “unfair advantage” if you will, that it is, and how that built in advantage can blind you from the true effectiveness of the online business.

Why is branded search your enemy?  It’s not, however misunderstanding the big picture can be.  What happens is that the branded search subsidizes the non-branded search.  This makes you misjudge the effectiveness of your paid search campaigns which can cause you to both loose profit and fail to raise revenue.  You loose profit because you mistakenly believe your paid search campaign to be profitable while in reality you may be handing over the lion’s share of your hard earned gross margin to Google, who is more than happy to take it.  It’s a different kind of stupid tax for the rich.  You may loose revenue opportunity because you aren’t able to truly tap into this traffic source to grow the business because you’re not as focused as you should be on making your non-branded campaigns more efficient.

Of course ultimately branded search is how you win.  But the wining is not in the buying of the branded search, it’s in the creating of happy customers that want to buy from you again and cause those people to search for you.  Just don’t confuse the two.

If no-one is searching on your brand and your business is massively dependent on new customer acquisition, you might as well consider yourself an extended employee of Google because all the live long day you’re just working hard to put money in their pockets.  Knowing how to profitably acquire customers in Google is obviously important, but in order to win long term, focus your resources on getting that customer to buy from you again.

The Truly Pathetic State of Mobile Commerce

Do you know why Internet Retailer’s Mobile 400 List isn’t “The Mobile 500”? Because of all the companies Internet Retailer reviews to compile its famous lists, there weren’t 500 retailers with mobile sales worth mentioning. The last company in the list, #400, did just a little over $17,000 in mobile revenue in all of 2012.  If that’s not pathetic, I don’t know what is.

Don’t get me wrong, I don’t want my money back. I think this was particularly insightful to see, and glad they published it.  It was also interesting to see that most of the big winners in mobile commerce are in travel and entertainment. If you’re in that industry, I would take mobile commerce seriously. Hotels, airlines, rail travel, vacations, car rental, movie tickets, concert tickets. Basically ticketing and reservations. That’s not to say that the top of the list isn’t peppered with huge retailers like Walmart and the like, but if you were to remove the retailers who are just doing 1% to 2% of their total online revenue on mobile, the top of the list would be almost exclusively ticketing and reservations. Think about what this says.

While Internet use is obviously trending away from desktops to mobile devices, mobile Internet usage is fundamentally different than desktop. People seem most comfortable using their mobile phones to transact when they don’t really have to “shop” or closely look at or evaluate what they’re buying.

They just know they want to go to a particular place at a particular time, and are fine closing the transaction on mobile. What drove them to decide to stay at that hotel or watch that movie or take that flight did not originate online or from a mobile search engine.

If you’re not in ticketing or reservations, here’s my generalizing takeaway. Large brick and mortar brands that launch an e-commerce site to sell online without any particular effort, do generally about 2% of the company’s overall revenue online.  It would be zero for most but because of the brand equity from the brick and mortar, about 2% trickles down to their existing customer base who would prefer to transact online. These companies are so big to begin with that even 2% of their revenue translates to hundreds of millions of dollars.  Next time you’re impressed hearing that Walmart.com is on track to do $9 billion online, remember that Walmart’s total revenue is $447 billion, so they’re right on track to claim their default sales of 2%.

Mobile seems to have the same relationship to desktop sites. Mobile revenue seems to be about 2% of online revenue. That tells me that just like big brick and mortar brands who launch an e-commerce site and make only 2% of their revenue online don’t understand to run an online business, online businesses who launch a mobile site and make only 2% of their online revenue via mobile don’t understand mobile.

Take a look at this example with 2012 revenue numbers:

In store revenue vs. online revenue vs. mobile revenue, 2012

From seeing this pattern, you might joke that if the future Internet enabled watches have special apps to shop on them, that you might then take 2% of the already small numbers being done in mobile and attribute that to watch device sales.  It’s almost like the smaller the device, the smaller the sales.

Desktop Geolocation – How valuable is ‘sort of’ knowing a users location?

I think Geolocation services are hugely important.  Since we’re all now used to the idea that our smartphones know our exact location and can immediately serve up content based on that, it almost seems prehistoric to have to enter your ZIP code into a web form for a website on your desktop computer to know where you are and serve content based on your location.  If my little phone can know exactly where I am, why can’t my big expensive desktop?

So sites are clearly doing geolocation so you don’t have to enter ZIP code.  But they’re doing a fairly bad job of it.  Desktop based geolocation services have 99.9% accuracy within a 25 mile radius.  While certain providers will have different accuracy guarantees and there are different data sources out there, all of them share the 25 mile radius limit.  Think about what that means for a moment.  The desktop knows where you within a 25 mile radius.  Not very accurate.  This is how we serve up “Results from Pleasantville” when you are really 20 miles away from Pleasantville.  Better than having no idea where you’re at but not terribly useful.  There are at least a couple important implications of this to consider.

Implications on Advertising by Geography

If you’ve ever tried to limit your AdWords, display, or other advertising to a geographical location, if you’re trying to limit your reach to areas where your conversion rate is highest or only to areas where you have brick and mortar locations, consider that it’s only going to be accurate within 25 miles.  So you can forget about being accurate down to the city in smaller cities.  You’re accepting that you’re going to allow in some traffic that is not actually in the geographical area you think you are targeting, making it less efficient than it should be.

Implications on Store Location Services

Many e-commerce sites from brick and mortar chains are challenged by having different pricing in different stores across the country.  In most cases before these sites can display a retail price they need to know your location, involving the user to have to enter their ZIP code and select their store, a few extra clicks and user interactions just to be able to see a price.  This can hurt engagement rate and conversion rate.  So a growing trend is to use geolocation services to automatically select the store closest to the user, and present this allowing the user to confirm the location or pick another so prices can immediately be shown.  This is smart but has drawbacks for retailers for lots of stores within a given area.  Remembering that desktop services are only accurate within 25 miles, it is likely that the “wrong” store may be automatically chosen.  While the UI can prompt the user to confirm or pick another closer store, users don’t know about the 25 mile limitation and may assume their desktop computer is as good at knowing their location as their cell phone is and assume that must in fact be the closest store to their home and not bother checking.  This concern can be mitigated with messaging however it is a key concept to keep in mind when employing this tactic.

Will the future be brighter?

Given the way desktop geolocation works to find your location, it is unlikely that the service will improve much unless desktop computers start shipping with new hardware with a cell signal so that location can be triangulated.  In the meantime, more and more Internet use is going to mobile devices including tablets.