Re: Private Label Search Sites

From: David Yancey <dyancey_at_proactics.com>
Date: Mon 02 Jun 2003 18:58:44 -0500

Sharad Kajaria asks about the wisdom and feasibility of building and
operating a private-label paid search product for a mid-size publishing
site with 30MM monthly impressions.

We are strong believers in the future of private-label search. We just
introduced a next-generation technology platform for PPC. Readers can
check it out for themselves, at http://www.prowebguide.com , and see why we
claim it breaks new ground - the important thing here is that the platform
has been specifically designed to be used as the foundation for
private-label search sites, corporate portal search, Intranet/Extranet
search, B2B exchanges, and other custom applications.

The "pros" Sharad lists start with additional revenue. The problem is how
much selling expense, plus maintenance, is required, and how much of the
revenue will be left over.

Sharad (or his client) makes the huge implicit assumption that keyword
bidding is the only way to go in setting up your own paid-search
service. There are several reasons this pricing model may *not* be the
best way to go. We can get into these separately if readers wish; my point
here is that Sharad and others need to understand that what seems so
obviously good for the owner of the search site may not be good for the
paying clients, and that serious thinking is called for. There are other
ways of pricing paid-search, in short. Settling this policy early is vital
to your private-label plan.

[Full disclosure: I am known by some in the business discussion groups as
an "anti-keyword bidding" advocate, and our own www.ProWebguide.com does
not use this pricing model. But we designed the platform so others can do
so, if they think it the best pricing mechanism for their case and clientele.]

The huge positive to a private-label site is, as Sharad suggests, premium
click-through prices due to better audience targeting. We have spent
months researching and then designing for this specific angle, and he is
right. All I can say here is that the good old 80/20 rule is operating in
SEM just like everywhere else. The premium clients pay so much to be on the
upper page, that one should seriously consider simply giving away listings
way down at the end - the tiny incremental revenue is not worth the support
expense.

The negatives include the cost of selling the paid listings and building
the tool. But Sharad's shortlist overlooks the equally big "cons" of:

1] Supporting clients on an ongoing basis - all I will say is that the
back-room support costs of the majors are out of control - so much so that
we designed our back-room automation even before testing our stunning new
indexing and search algorithms.

2] Ongoing operations - even with automation, Sharad needs to be factoring
in the cost of a 24/7 site that MUST have client support available all the
time. I have been a major web publisher, plus have managed one of
America's largest commercial data services, and I can tell you that the
operating costs of publishing and transaction services are night and day
different.

3] Traffic building - Sharads' brief query implies that the client is
assuming that his current visitors will be sufficient to generate
paid-search revenues. There are more pros and cons, here, too - let's just
say that this may not prove to be the case. The private-label site needs
to have a traffic building strategy quite apart from that of the parent
site. And you need to investigate the idea of working with others in a
co-op effort to accomplish this, without losing the identity of your
private-label brand. The key point is that you must expect to pay for at
least some portion of the search traffic, and that money has to come off
the top.

4] Ongoing product management - there is no such thing a s a hassle-free
or management-free revenue source, and PPC is no different. Someone must
be responsible for managing the business day-to-day. This is no small
task. Consider what we know about affiliate programs management: if you or
a paid consultant don't work with the top affiliate partners constantly,
you won't see sales continue to grow. SEM is even harder. Your top
paid-search clients will need constant hand-holding. Leave them to their
own devices, and they will move their per-click budgets elsewhere, in time.

5] Closely-related to the above negative, with a small-volume private-label
search site, you cannot look to the SEO/SEM consultants to do all this
primo client hand-holding for you, in the way they do it for Google Adwords
or Overture. The numbers to pay for the expertise are simply not there.

6] Lack of differentiation - If the private-label site simply looks like a
knock-off of the same sort of tool one can see at, say, GoClick, Findwhat,
or eSpotting, then the users will quickly see that it is simply a way to
make money for the parent site. The problem is *not* that they might
resent this - just that they will see you have done nothing *special* for
*them*. You need to see the "finding process" from their point of view,
and build the appropriate functionality to make them feel that your search
is not just there to make bucks for you, but to save them time or whatever,
too. The negatives here are potentially very dangerous. Realizing this,
we designed our technology to be packaged with a hundred or more "look and
feel" solutions, and perhaps others have this kind of built-in flexibility.
Whomever you go with, clearly, real product planning and site integration
is called for. Differentiation is as important here in these back-end
services as it is on the front page of the parent site.

7] Partnering - Sharad implies that a "pro" with private-label search is
not having to share the revenues. This may be the case; an even stronger
case however is that an intelligent revenue-sharing scheme can make the PPC
idea a home run. There are numerous considerations here that need homework.

Wow! With all this, is private-label such a good idea after all?

We think so. For one thing, Sharad's list of positives leaves out a few
significant ones, such as potential tie-ins with the parent site's
conversion processes, new parent-site traffic coming from the search tool,
potentially higher re-visit rates.

For another, Sharad and his client may be amazed once they see the add-on
profit potential of paid search, or the added "community" effect of a
well-integrated search tool with the other parent sites. But the largest
"pro" of all is that finding and connecting online is going to get bigger
and bigger - and the big search engines do *not* have more than a few of
the answers for this application. A site that extends its community
attractiveness with supportive search will have an edge that the
impersonal, all-things-to-all-searchers search engines cannot match.

We simply advise you to do the math and other homework carefully and
exhaustively up front. Hire qualified expertise, as you would in planning
any major new technology-based business. Think long and hard before you
try patching together a few scripts for a look-alike PPC.

David Yancey
Proactics Partners
http://www.prowebguide.com - "FREE Basic listings during our Beta - - Now
with over 150,000 e-business and Internet industry website listings - - Is
your site listed yet?"






Received on Mon Jun 02 2003 - 18:58:44 CDT