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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 email@example.com.
Vice President, Customer Operations
No Dan... I can't go with that. Prior to the GoTo 'Deepest Pocket Wins' model, the net was still a healthy market - in fact more healthy than it is now.
When GoTo hits the wall, there will be plenty of other search resources around to fill the void... search resources that rank on RELEVANCY rather than budget.
In addition.. the corruption caused to engines like AV will suddenly be diminished.
This will all benefit not just those with placement skills, but users, the guys who just want the best matches to their search.
What GoTo has done certainly stinks, but it is not out of line with their overall philosophy. Yes... I will be delighted when they crash, and I'm far from being the only one.
>If GoTo were to go away, it would hurt all of us, .... It would also reflect badly on the ecommerce community as a whole.
I don't see why. I've never spent any money at GoTo, because I too thought the "highest bidder always wins" mechanics were awful. If the top site on GoTo has the money, they'll stay on top even if their products and site are lousy. having a search engine that returns results for the highest bidder reflects badly on the e-commerce community, in that quality content is irrelevant to ranking. That's also the reason I don't use GoTo for any of my searches.
I think pay-for-listing engines are on to a much more equitable model. You pay to get into the engine, as long as your site adheres to their basic relevance/quality standards, and after that, you need to ensure the continued quality and relevance of that site to rank well.
A one-time fee for a directory listing is fair, and does not hurt the quality level of the results... anyone can save up the money to get into Yahoo, provided their site has enough quality content to get in. An annual service subscription like PositionTech/Inktomi is fine... the rates are fairly low (for now), and your site is re-spidered often enough to allow for contant improvements and changes to be reflected in the search results, allowing you to constantly work to improve your site's position.
A pay for rank system means your site doesn't have to be well maintained, high quality, updated regularly, or anything else. It just means you spent the money to put it at the top. I think accurate ranking of high quality, relevant sites (something all SEs are still working on perfecting) would reflect much better on the internet/ecommerce community as a whole, than would the continued existence of "the big money always wins" SERPs.
It always seemed stupid to have a human being review my 1 cent listings. Would have been better, though, to nix the reviews, not the 1 cent listings.
Quick review of my December GoTo report shows the 5 cent minimum would have increased my costs only 6 percent, although, many keywords were seasonally expensive in December.
Are any competitors to GoTo worth the time to setup a listing?
another of my .02
a #1 listing for "keyword1" in the standard listings will return me 2X the visitors as a "paid by sponsors" listing done with GOTO. So yes return on perfectly optimized pages is better. However for semi-generic terms or super obscure terms that I can't get a listing for this is a way to get exposure. An example would be a manufactured home dealer. I don't want text on the site for "mobile home", "manufactured home" is better. So this makes this term harder to get a listing for. I can pay for the term.
>> another of my .02 <<
Sorry, your .02 listing has been rejected. Would you care to make it .05?
The bottom line is that GoTo has far too many customers that cost them money. I read somewhere last week that they have around 30,000 advertisers and the monthly average is around $200.00 per advertiser. The problem is that most of the revenue that makes up that average comes from a handful of customers like Dan. They could probably loose half of their advertisers and not see a significant hit to their gross income.
Right now, the guy who spends $10.00 a month has access to the same level of support as the guy spending $5,000.00. (And based upon my personal experieces, I can almost guarantee that the $10.00 guy calls tech support twice as much).
With that kind of setup, advertisers like Dan are basically subsidizing everyone else. Even if the company as a whole is turning a profit, it still doesn't make any sense to retain clients that cost you money. I know I wouldn't.
What I don't get about their new pricing, is why they would introduce a new structure that will also require the advertisers that do produce a profit to spend even more. I think it makes sense to establish some type of minimum monthly expenditure, but to make the guy paying the $5,000 a month pay an additional 5-10% by forcing him to raise his bids, seems a bit stupid.
At the moment, a GoTo campaign usually costs less (in the short term)then the costs involved with turning a large, complex, and multi-product ecommerce site into one that has a chance to obtain high non-paid positions. The $.05 per click minimum will almost certainly drive the overall costs up. When that happens, more of the high dollar advertisers will start moving portions of their budgets elsewhere. (Places like traditional SEO). For the life of me, I can't figure out why the don't see the potential downside.
So pay-per-click encourages sloppy, out-of-date, irrelevant sites, does it?
In my experience, the goto listings in our chosen field (even our competitors')stand out for their relevance when compared with several spam-stuffed spidering SEs.
We've tried the low-cost bulk purchase of keywords on ultra-specific terms. Traffic is predictably low, but if they don't click we don't pay, and 5c is still very cheap.
BTW, what kind of neologism is "grandfathering"? Are they paving the way for the mooted rebranding of goto? Will it be as grandpa.com, grandaddy.com, or despicablecapitalistpatriarch.com, as certain contributors would appear to prefer?
"Big money" drives out "better" sites at other models of engine also. Rubbish sites can buy as many clicks as they like...conversion to customers is a different story.
Hmmm... reality though is that the small man won't get a look in, no matter how great or relevant his site is. The big budgets will dominate the search... based on that alone... budget.
Surely, only the most misguided would prefer search returns based on budget size rather than on quality & relevance.
Yes, the budget rich and those apologists who speak for them will be rubbing their hands with glee. But no, this is not good for the net at all.
May all GoTo's problems be enormous ones.
True, Napoleon, only the most misguided would prefer size to quality, but such is life (and love!)
When searching I want relevance - not spam. The issue is choice, and lies with goto's clients. This is where I would have a gripe with their model, particularly in the UK where they have no intention of being a SE themselves. We need to know where our bids are going to be displayed, ideally with an opt-out? - all the more so at 5c a click minimum.
I completely agree with mivox and Napoleon on this one.
There is no justification whatsoever with the business format of GoTo.
This goes against the internet and what it stands for. Small business should always be able to compete with big bucks. GoTo is trying to turn the tables with this by allowing ANY kind of site at all to be shown at the top of major search engines.
NOTHING else matters to GoTO except the fact that if a business has Money, they can be at the top.
NOTHING else matters but money.
The search engines are doing their best to show relevant sites in the regular results. To tell you the truth, they are becoming MUCH better with this.
They are cracking down on spam, and ALL related to spam.
Results are becoming more and more relevant.
The lazy man's way to the top is thru GoTo....... with money. Period.
NO work is involved with that. How tough is that???
A truly good site at the top of a regular search is one that is very relevant, well optimized, looks good, and tastes great!! :)
Now, you tell me, as a searcher, which type of link/site would you rather click on? A no-brainer for me.
The big buck site?....I don't think so.
I remember a similar situation to this that occured a few years ago...
I was running a computer company that worked closely with an ISP. That ISP decided to start offering unlimited internet access as a method of stopping multiple people from using the same 200 hour/month account. They immediately lost 20% of their customer base.
Many of the advertising-based revenue model ecomms run at a constant loss, not because they are inefficeint but because it's quite easy to run at a loss when you have to acrue millions in technology depreciation every year. If they spend $10 million on computers, and they say their computers last 5 years, they get to claim $2 million a year in computer depreciation. Add a couple hundred thousand in dedicated line costs and renting a building at a million a year and it's no wonder they can't make money.
But a fair chunck of that loss is paper loss. Amazon.com would be long gone if they weren't just reporting paper losses. Most investors would have yanked their money out by now.
So what does this say about Goto? It shows that they have a neat way of stating their losses in a downside rick economy where all stocks of their type are losing value as a method to increase the rates they charge us. Increase your rates, and you'll lose business. Expect to see some serious red ooze from Goto's beaten and battered carcass the next couple months.
And the more red ooze the better.
I have spent a lot of time thinking about this in the past 24 hours, and I have come to the conclusion that this can't do anything but hurt GoTo's traffic. Their intent was to weed out guys who were only bidding on lots of cheap words, but they forgot (as I mentioned earlier in this thread) that a lot of companies use the cheap clicks to average out the much higher clicks. The net results will be something like this:
1. The very small guys ($20-100/month) will continue to bid on the words that they used to bid $0.05 or higher. The money they used to use for low-cost bids will either not be spent or will be spent on low-cost traffic on other PPC engines.
2. The larger guys (>$100/m) will spend more time looking at other search engines (mamma, bay9 and others) to divert lower-cost traffic, and at the same time will start putting higher-priced words up to compare conversion with GoTo.
3. Net result will be less relevant searches on GoTo, and considerable marketing dollars diverted as advertisers are compelled, by GoTo's actions, to investigate competing search engines.
Unfortunately, in the short term (probably until the end of the year), this strategy will appear (to GoTo) as though it is working. It will indeed drive revenue up and cost down for a short while. But as more and more of us look elsewhere for sources of qualified traffic, they will feel the impact.
IMHO they only need to show good profitability to gain additional funding, to get over the April 16th "death date." The combination of the new policies, Match Driver, and minimum bid increase may do just that - show a glimmer of hope/hype, spurring additional funding, and higher stock prices. Be assured that there will be "behind the scenes" work on the stock. If that fails in the short run from now to mid April, expect a buyout.
Using the 80/20 rule (Pareto Principle), a loss of 80% of their advertisers <the little guys> will not hurt, but will enhance their profitability. It costs the same to process and maintain 1000 terms and bids at .01 as it does .05. And if you are paying .03 per search to affiliates, a bid of .01 yields a net loss in revenue, whereas .05 yields a gain of .02. (Way over simplified, but you get my drift?)
As a businessman, from their side of the table, this makes good sense. As an advertiser using GoTo for dozens of clients, @!#$^%!!!
Goto just made the Inktomi & LookSmart type deal look soooo good! As someone said earlier, being on LS & Ink is by far "better" than this goto game.
This is what happens when you try and buy your way into a market! Can it really be that these fools spent that much mula to get known?
What is the next biggest PPC SE?
Edited by: WebSpinner
GoTo's reply to complaint letters:
"Thank you for your inquiry.
We're sorry to hear that you're unhappy about our recent price increase. We value your business and do not want to lose you as an advertiser. While we recognize that the minimum bid and the minimum monthly spend
requirements are new to our business model, we continue to believe that GoTo is still the best, most cost-effective way to promote your site on the Web.
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.
As you know, listing your site on GoTo is still 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.
Please do not hesitate to contact us if we can be of any further assistance.
74 N. Pasadena Avenue
Pasadena, CA 91103 USA"
I do not know how they can say that the traffic is "highly targeted"
Especially after all the bogus clicks that have been uncoverd from Wayads and a few others over the last few months.
"Highly targeted" traffic is a visitor going to Google or another major search engine, and typing in a term to get the first page of results, and then clicking on a regular link that comes up.
Now, that is targeted and that is not bogus, AND that is a true, prospective customer that is coming to your site AND one that is highly motivated and ready to see what you have to offer.
You know, I am sorry to say but this ppc thing could end up being just like banner ads. Advertising that just does not add value to the bottom line.
I am not blaming GoTo and the other companies trying to make a go at this, but if we cannot convert sales profitabiliy at price that allow these companies to stay in business we all have a big common problem.
Our common goal is to get the viewer to hit a buy button of sorts. If we do not promote this somehow through an education program and a promotion program we are all going to be lacking sales.
Somehow the industry needs to come together a come up with some strategy, or it just become a race to see you can be the last one not to go bankrupt.
Post continued in part two [webmasterworld.com]
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