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|GoTo price increase! AArgh...|
New bids minimum 5c, per month minimum 20$
Dear GoTo Advertiser:
Over the last 2 quarters, we have signed a number of big traffic deals
with premier Web sites which has resulted in even more targeted traffic
to your site. These traffic deals have increased our costs and as a
result we're implementing a modest price increase. Effective today,
March 1, 2001, two new price increases will affect the GoTo marketplace.
Pricing Change to Your Account:
The first change is a minimum bid requirement. As a result, all bids
for new listings created after March 1st will need to begin at a minimum
of 5 cents.
The second change is a minimum spend requirement. Effective March 1st
all new accounts will be required to spend a minimum of $20 a month in
clickthrough charges. Accounts with a monthly spend of less than $20
will be charged the difference between their spend and the $20 minimum.
Grandfathering for Accounts and Search Listings in place as of March
In order to minimize the impact these changes have on our existing advertisers,
we are "grandfathering" your current listings. As a result, these changes
affect your current listings no sooner than September 1, 2001. This means
that if your bids are currently below 5 cents, you won't have to increase
them until that date. What's more, for all of your existing account(s),
you won't be required to spend a minimum of $20 in clickthroughs until
that time either.
There are a few things you should know about the "grandfathering": During
the "grandfather" period, any bid changes you make on a given search
listing will make that search listing subject to the new minimum bid
requirement. That means, bids that you change will be required to begin
at the 5 cent minimum and cannot be lowered again after you have changed
your bid. You can, however, make editorial changes, such as title and
description modifications without having to increase your bids to 5 cents
or above. Additionally, any new listings added to your account(s) will
be subject to the 5 cent minimum bid.
In addition, during the "grandfather" period, you won't have to meet
the minimum monthly spend requirement of $20 for accounts that were in
place as of March 1, 2001.
We will send you a reminder e-mail with all the details of how your account
will be affected after the "grandfather" period expires when we get closer
to that date.
As you know, listing your site on GoTo is the most cost-effective way
to reach lots of targeted customers. This is the first pricing increase
that GoTo has introduced since our founding in 1997. By making a modest
increase in some of our pricing, we're able to keep offering you the
best and most highly-targeted traffic on the Web, while still making
it cost-effective for you as a business.
If you have any questions about GoTo's minimum bid or minimum spend requirements
or how to maintain your "grandfather" status during this time period,
please click on [goto.com...]
to find out more about Minimum Bid and Minimum Monthly Spend or feel
free to email us at firstname.lastname@example.org.
Vice President, Customer Operations
This is real news.
Thank you Nathan_Power for also posting.
imho, it is refreshing to see a dot com show an interest in profitability. I'm sure the word is out in Pasadena "no more eToys" Mr. Gross and company is watching them from across the street.
GoTo is a fine targeted traffic generator and I'll be pleased to pay 5¢ to insure their survival.
I do agree that it is a fine target market generator but many people have niche markets that have virtually have no competition. The goto increase means a 500% jump in spending. This is alot for people...I knew the Goto thing was too good to last. Oh Well, I feel sorry for those who have thousands of keywords and phrases on goto. :( :(
Existing accounts do have 6 months before their 1 cent bids are raised to 5 cents, and before they have to pay a minimum of $20 per month.
This means that on September 1st, I'm going to terminate most (though not all) of my GoTo accounts, or at the very least remove a lot of keywords which I didn't mind bidding on for 1 cent...
>at the very least remove a lot of keywords which I didn't mind bidding on for 1 cent...
YUP, same here.
We will review our mis-spells list which produces minimal traffic but has kept the average bid down a fraction.
I think people will look harder at their ROI and make a few changes to their sites in order to improve the conversion rates.
Edited by: Mike_Mackin
I believe they will lose more in the 1c's than they will gain in the 5c's. And the $20 minimum spend will create ill feeling as has already been shown in this thread.
Consider also exchange rates, $20 doesn't sound too much, but it is $40 here in Australia with the Aussie dollar so weak at the moment. Other countries will be feeling the pinch as well.
A case of killing the goose in my opinion.
>I believe they will lose more in the 1c's than they will gain in the 5c's.
I agree. Think of the thousands of keywords people have bid on that are all going to be dropped now. I don't know who did the calculations for Goto but they goofed on this one. Will people increase their bids over this? I'm not so optimistic about it.
I was testing Goto.com to see what it could do for my click-through ratios on several key products. I was going to continue this test another stretch, but Goto has, imho, decided it no longer works for the advertiser but for itself. If it couldn't make money with millions of 1 cent clicks a day, the 5cent clicks aren't going to help. I have 3 listings over 5 cents, and after my current balance runs out I will stop paying into goto, even though it doubled my traffic. I can't see paying that kind of money for the minimal return it gives back, and having to reset all my bids in September to try to beat out thousands of 5 cent bids isn't worth my time and effort.
Goto will lose out in the long run. I agree that they will lose more 1cent bids than they'll gain in 5cent bids. They have just turned off a fair chunk of the PPC market.
They must have done the following calculation:
how many clients do we currently have that spend at least $20 monthly and whose bids are all/mostly at least 5 cents? Okay, we won't lose these.
Now how many clients do we have that spend at least $20 monthly, who have some bids at 5 cents or more yet have many bids at less? We probably won't lose most of them - if worst comes to worst, they'll cancel most of their 1 cent bids eventually, but will leave their higher bids alone. Anyway, the more popular keywords necessitate 5 cents or more (they said to themselves).
How many accounts do we have that pay less than $20 monthly? We are a business, and frankly, these accounts don't amount to enough profit given the time spent on them by us, even though there are many of these.
And here is the clincher - supposedly you have until September 1st to decide which bids you want to abandon, but I bet you that for many of these keywords, you'll have to decide a lot sooner. You see - any new GoTo customer that wants to bid on one of your 1 (or 2-4) cent keywords where you were until now no. 1 will outbid you right away, since he can't bid less than 5 cents... And you'll have to decide then and there whether the keyword is important enough to "fight" for or to let it die a slow death...
All in all they must have come to the conclusion that they'll gain more than they would lose - or they decided to gamble based on future expectations...
What they underestimate is the number of people that place minimal bids because they don't have the budgets to pay big bucks for some keywords. I'm probably less-than-average for their type of advertiser, but 90% of my bids are less than 5 cents. I went through $150 in just over a month. I'm assuming there must be at least 10% of the goto community that fell the ill-will and can't afford these higher rates. So they would lose at least 10 percent of their business.
Secondly, it's going to be very hard for them to gain new business with this click through system. This means they're going to have problems sustaining growth.
Thirdly, most people with hundreds of 1 or 2 cent bids will probably cut those listing out all together, not raise them to 5 cents. (Of course they'll force you to remove these bids manually, as their form of negative-option marketing.) I beleive this will put them more reliant on other search engines to fill in the gaps, which will further increase their costs.
I admit Goto is a nice engine with good potential, but not with these new rules. I beleive you're watching the beginning of the end of another ecomm.
Well, for me... Goto should know exactly where they can stuff their price rise.
I have small bids on a few phrases which have generated some traffic. I never liked it though... GoTo stands for "he with the deepest pocket always wins". My personal view is that this stinks, and is not the reason I entered the SEO business, even though I do have some wealthy clients.
It also has the effect of forcing out the very small players (the hobbyists, the struggling enterprises trying to compete with big boys, etc). $240 pa for each keyword is FAR too much for many of these.
But then again, why do I keep expecting principle, when moves like this are motiviated by pure greed? And no, I don't buy into the line that 'the great God capitalism must prevail'... capitalism should not be a giant juggernaut allowed to roll over the small man without implications.
On the future of Greed Inc (GoTo), I predicted some time ago that it was only a matter of time before someone created a script that would:
- open Goto
- open the first site on the list for a competative keyword
- close everything
- delete cookies
- change the IP address
- repeat the process millions of times
I believe that this move (a 500% rise!) will only bring that day closer, as more and more people start to view SE's (at least GoTo related SEs) as something for big corporations and therefore alien to themselves. I won't exactly cry about it when it happens.
A bad day then... certainly for the net, as GoTo infestation continues to corrupt otherwise decent search engines but at five times the price.
>I believe you're watching the beginning of the end of another ecomm.
Actually that's what they are trying to prevent with this action... The way I see it, their business model based on the previous pricing has flopped - and they're looking for a way out...
Theoretically, they have in their hands all of the data necessary to calculate whether they're going to lose big time or maybe save themselves. "We have this much clients of this type who pay that much who we're not going to lose. We have that much who we're going to lose. Now let's suppose we'll lose more, what's going to be our situation? And if we continue the way we do now, what's going to happen?"
I really don't know why all of you are upset! It's just a small increase (500%)..LOL
Can we say "GREEEEDDDD"!
How long before they drop it back? I say 6mo..Anyone?
Here's an email I sent to GoTo - I suggest others do the same:
"Aaaarrrghhhhh! A 500% increase!!????
Who do you think you are?
We can't AFFORD to pay a minimum of fives cents for every visitor who comes to our site - after all, 99% of them don't buy anything. We're a non-profit making literature site (1Lit.com). We could pay 1 cent and pay for it through the odd Amazon affiliate link on our site, but 5 cents???
As I and others have been predicting for a while: in a year or two the Internet's only going to be for the big boys. Anybody with less than $500,000 won't stand a chance of getting a net venture of the ground.
I would welcome your response (though no doubt you're too busy sipping champagne).
All I can say is wow.
Awhile ago I decided to give GoTo a try with a site. I got undesirable results so I stopped.
I have no clients that use them. Now, I'm soooo relieved I am not one who has to tell this news to clients.
I do feel bad for those of you who do. The ROI for many sites will not justify 5 cents a click when conversion only averages maybe 1%.
I use GoTo fairly heavy....let's say well over $100/month and trying to reduce that while keeping most of the revenue that it generates. I have around 750 keywords but the majority, probably 600 are .01 Are they worth 500% more? No. Almost all are not so they will be cut and this is where a fair amount of traffic comes from. I can't afford to rank high in the $1.50 keywords. That's crazy. GoTo will not gain on my account. They will lose because I can't/won't increase what I'm paying now. The only plus is that it may bump positions up a bit as others close accounts.
April 16th just got a little closer. From dotcomdeathwatch.
Hahaha - Greed Inc
Well didn't they say they were planning to change their brand image?
It makes sense though, they need to maximize profits, and they see a much higher profit margin on big bidders (both in term price, and overall spending). Less maintenance + more money = higher profits. Those 1c bids and small spenders must not be worth their time.
I must say that in all fairness to Goto and other dot.coms is that they must find an equilibrium between price, profit, and satisfying their shareholders. Part of the reason why the porn business is so successful in the internet is because they were all able to achieve this equilibrium early in the game. I hate to say it they followed a proper business model for such improper business. lol The problem that Goto faces is that it has not been able to keep it's stock from falling. The only mistake is that a 500% jump is too much and maybe too late in the game. In an attempt to find that equilibrium Goto now has tilt the scale the other way in which all these new people that have joined Goto might leave thus leaving in a worst off position in which they started. I think that since they have given us till September 1 they are going to see how many people will actually bite that 5 cent startup. I think if enough people do not sign on which I think will happen Goto will reduce that minimum bid to 3 cents. Only time will tell...
I especially like how they told us on the day it happened so we couldn't run out and grab a few more listings to get grandfathered ;)
Reducing the number of customers while increasing the revenue per customer can be a way to reduce your employment costs and improve profitablity as long as your revenue amount stays the same or continues to grow. I don't have the numbers that GOTO management has (or should have) to know whether this was a correct decision. Anyone who thinks that a search engine is online to make webmasters money while not making themselves money needs to retake economics 101. As SEO companies and freelancers this increases our value. As the price for online promotion goes up, the knowledge bases that we have built (and hopefully continue to build) will be worth more on the open market. It will be too costly for companies now to make the "expirements" that we made yesterday for .01 (metaphorically speaking).
Dwedeking that is an excellent point. This makes pure SEO efforts more valuable. The goto presence has cut into my pocket as Joewebmaster has opted to bid at goto as an alternative to paying for SEO efforts. I've had to
compete with goto and it's clones, this actually will be good for some of us.
This certainly throws the market open to other PPC's, specialising in specialist areas with lower minimum bids. GoTo has decided that the top whatever % of customers brings them in enough revenue to make up for the lost small bid market. That's a business decision, which of course is up to them.
The danger they face however is that struggler PPC's will now have a higher exposure of their brands, possibly losing GoTo their present brand image as really the only serious PPC. It opens up the market for competition, who may develop further models to challenge GoTo in the long term.
It also makes other methods like PFP, direct advertising, Pay for crawl, etc etc. Hell even the banner ad may make a comeback!
Still did they have any choice? I doubt it would be possible to make much of a profit on small bids, after all the admin costs...
The year will prove whether PPC is a viable business model, or whether it will only work in the bubble market that generated it.
Over the last 2 quarters, we have signed a number of big traffic deals
with premier Web sites which has resulted in even more targeted traffic
to your site
Translation- we have lost so much money in the last 2 quarters that we feel it necessary to blackmail all you suckers.
These traffic deals have increased our costs and as a
result we're implementing a modest price increase.
Translation- We are just plain GREEDY and there is nothing you can do about it- ha ha.
I am proud to say that I am one of those cheap skates who bids 1cent on over 700 phrases. At this price it was cost-effective and worth continuing. A 500% increase is a little steep.
What really pisses me off is the monthly minimum. It is without a doubt, blackmail.
If I am going to invest $20 per month X 12 = $240 per year I would rather invest in a Yahoo or Looksmart directory listing.
In my opinion, Goto's days are numbered and they are going down.
"If I am going to invest $20 per month X 12 = $240 per year I would rather invest in a Yahoo or Looksmart directory listing."
No matter the amount you are investing per year. A good Yahoo! listing is cost effective.
You feel $240 is too much of an investment. The pay rates for the customer service rep that checks your listings is probably a little more than $240 per year. How many listings can that single rep check and ok before they have used up the $240.00 in employment salary alone (let alone taxes and furniture for that employee).
This is not a case of greed or an attack on little guys. This is a means of trying to make a business stay alive.
Most businesses do not get venture capital and a time period that they have to be profitable. Most (including mine) started out with personal money and had to be profitable from the 2nd day (I gave myself 24 hour leeway :)
There are a number of points that have been missed here, but let me just hit on one, particularly for those of you who focused on the $0.01 bids.
We have tens of thousands of words on GoTo. Our lowest bid (obviously) is $0.01, and our highest is $0.52. While we have many more words in the $0.01 - $0.05 range than any other price range, we spend MUCH more money on the higher-priced words. The very low cost words allow us to average out our expense on GoTo.
As I told my rep and several higher-ups at GoTo this morning, this is the type of arrogance that I have often seen from companies that owned markets (anyone remember Ashton-Tate? Borland? Osborne?). They have made a fundamental assumption that people will grumble for a while and then live with it. I can tell you that this is CERTAINLY not the case with me.
One last thing: an increase from $0.01 to $0.05 is NOT 500%, it's 400% :)
Instead of worrying about why this happened. What we should be doing is discussing our plans of attack. I noticed after the last "change" (the 3 day worth of funds) that my rankings for non-payed for listings increased in certain areas. This may have been due to fewer clients buying listings. If the same thing happens here then GOTO will still be a source of listings for obscure terms supplied by inktomi.
I have a new attitude about this. Now, the value of a good copywriter goes through the roof :) If it costs 4 times as much to bring the visitor there <on a previous 1 cent bid, obviously>
My copy must be compelling enough to get those conversions to be 400% better.
I hate it when a dotcom goes bust. However, when Greed Inc (GoTo) hit the wall, I will be laughing for days... it will be a great day for the net.
I frankly find their whole philosophy and model (richest pocket always top) to be obnoxious. Adding the new 'stuff the poor man altogether' line to their repertoire just about takes the biscuit.
>> when Greed Inc (GoTo) hit the wall, I will be laughing for days... it will be a great day for the net. <<
Jeez, you totally miss the point here. I haven't followed the whole thread, but I assume you are somehow involved in some part of the ecommerce world. If GoTo were to go away, it would hurt all of us, not only from the perspective of losing a valuable marketplace. It would also reflect badly on the ecommerce community as a whole. Far from a "great day for the net," it would hurt us in ways we haven't even considered.
GoTo has made a very unwise choice here, don't get me wrong. But separate the emotion from the situation, and just think about the effect it has on business.
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