Whether you’re an analyst, economist or a just a red-blooded American consumer, your eyes are probably fixed right now on the retail industry. We’re all looking for a glimmer of hope that consumer spending during the holidays will survive the credit crunch, sputtering equity markets and corporate downsizing. And now that we’re officially half-way through the holiday retail season, what better time to see how retailers are faring online this year. Specifically, are online retailers ahead of or behind last year’s pace?

For this analysis, we’ll focus on a single metric: daily unique visitors to individual online retailing sites. This helps to isolate the impact of fewer available shopping days between Thanksgiving and Christmas this year. Clearly, to get a more holistic picture you need to understand additional metrics such as order size and the impact of promotions on margins. Regardless of these two inputs, however, getting shoppers into your online store is a supremely important first step.

The graph above shows total unduplicated daily visitors to a group of ten retailers that Compete monitors as a harbinger for the rest of the retail industry. The blue area represents performance in 2007, and the red overlay charts this year’s performance looking back to November 1. The data show that, as a group, these sites are ahead of last year in terms of driving people to shop their online stores. So the mix of promotional strategies that online retailers are using to lure shoppers in appears to be working.

This market level view is a great proxy for the performance of the industry at large, but yesterday’s post shows that the fate and fortunes of individual retailers can vary widely – even those within the same retail category.

So how is the mother of online retailing, Amazon.com, performing so far this season? The chart above highlights Amazon’s unique visitor traffic and shows that things seem to be going quite well. This chart graphs the accumulated daily shoppers at Amazon, overlaying season-to-date results for this year against 2007 actual performance. Specifically, the chart shows that Amazon is capturing more shoppers this year than it did last year; this is based on increased online shopping among consumers in general, as well as a battery of promotions from the company to spur sales. And the best part of the story for Amazon is that the daily spread is increasing – meaning that Amazon’s performance is actually accelerating compared to the same period last year.

So there might be good news for retailers, the economy, and us consumers after all. If online retail trends continue in a positive direction – and yesterday’s Citigroup note corroborates our positive findings, consumer spending this holiday season may actually be bucking some of the other negative forces in the market. And that would be a great holiday gift…

We’re just 7 days away from the SES NY the next Search Engine Strategies conference. The show runs from March 17-20th in New York City, and what better way to celebrate than to interview Matt McGowan, Vice President of Marketing for Incisive Media’s Interactive division? Matt is spending more and more time taking properties like ClickZ and Search Engine Watch global, so he is rapidly acquiring a great sense for how international brands are thinking about SEM and SEO. Read on to hear how search marketing differs from country to country and what kinds of challenges and opportunities this poses.

If you’re interested in meeting Matt in person, come to SES next week. As further enticement, here is a code you can use to get a discount, courtesy of Compete (20SPKRGUST – 20% off when you register online). Jeremy Crane, our head of search, and I will be speaking at the conference; come by and see us at booth 102.

Share with us the reverse chronological order of your career and how it led you to be one of the key guys at Incisive Media.

I recently gave a run down here that said let me give you a little more detail…

I have been with Incisive Media for about two years now as the VP of Marketing for the Interactive Division, responsible primarily for the 10 year old Interactive News and Search Marketing sites, ClickZ.com and SearchEngineWatch.com and their subsequent event series ClickZ Events and Search Engine Strategies.

Prior to Incisive, I was instrumental in growing the online auction house, PropertyRoom.com, to an Internet Retailer 400 company. As the VP of Sales and Marketing, I ensured that there was always enough product for sale on the site, gathered via a very unique supply chain of Government and Law Enforcement found, lost, stolen and surplus property relationships and more than enough customers bidding on it. Yes, we engaged Search Marketing techniques, in addition to e-mail, public relations and other more traditional vehicles.

Earlier on in my career I worked for Charles Schwab & Co and Pearson Plc and I have a MBA from the University of Oxford.

You’ve got a great vantage point on SEM and SEO globally. What are the big trends you see for the next few years?

With the adoption of Blended Search behind us, there are quite a few trends developing that have yet to fully play out…

1. Blended Search will continue to evolve – the only guarantee is that SERPs will continue to change as the Search Engine’s (SE) learn to include more relevant information on them.
2. Social Media will continue flourish – the majority of web surfers start their online experience at the major Search Engines, that said more and more are heading directly to the MySpace’s and Facebook’s of the world.
3. Mobile Search is a massive opportunity – there are more mobile devices than computers out there. As wireless technologies evolve people may forgo the computer. This is partly what the Cloud Computing phenomenon is all about.
4. Analytics will be key – test, test, test… decision makers will increasingly go to the data to make decisions. The era of the thumb in the air approach to decision making is on its way out.

How would you describe the growth of SES in Europe? How is it evolving?

As expected. The Search Marketing industry is growing at a faster pace in Europe than it is here in the States.

Our SES London Conference and Expo almost doubled in size last year, from about 1,200 delegates to over 2,400. Now in its 9th year, it is now firmly positioned as the premier Search Marketing Conference and Exposition in Europe.

This past January we kicked off our continental European SES Forums, now in their 3rd year, with SES Paris. With 250 people in attendance we have constructed the SES Forum events to be more about intimate learning and networking. Delegates will find each event offers a relatively equal education on Paid Search (known in Europe as SEM) and Organic Search (know as SEO) in their local language, no exposition hall and networking events around sit-down lunches and evening cocktails.

SES Paris received a large amount of local praise and support, both the quality content and the quality of the delegates exceeded expectations, and we are now planning similar forums in Hamburg and Milan for later this year.

Let’s also not forget that we also hold a SES Tokyo forum and we plan to announce addition events in other parts of the world shortly. Stay tuned!

Since SES now operates in multiple countries, what are the ways you engage the local search communities in those respective countries?

Launching a product or service in a foreign country is no easy task and over the last few years we have been operating abroad in Europe and Asia we have adapted our go to market strategy based on our experiences abroad.

One of the most important pieces to the puzzle is finding the right partners – both from a marketing and an editorial point of view.

As the events are localized, they are held in the local language and focus on case studies, strategies and best practices taken from the local market, producing the conference agenda is no easy task. Under the direction of Kevin Ryan, VP and Global Content Director for SES and SEW, we have identified credible thought leaders in each of the markets we are operating in who we can invite to speak and work with to identify new talent.

On the marketing side of the equation, we have identified the local Search Industry trades and associations than can help us spread the word. We reach out to these groups and offer up cross promotional deals to engage them. In addition to the contras, we are also leveraging our Search Engine Marketing expertise to one, launch effective paid campaigns and two, optimize our site for local SEs.

How does each country present its own unique challenges - cultural or otherwise? Any funny stories you can share here?

Each country does present it’s own unique challenges and in order to do business in these markets one must acquire quite a bit of local knowledge – customs, language, industry specifics and alike.

How have you thought about new “social media” tools when marketing SES? How are you making use of newer tools to make London SES more accessible?

All the time… for instance we have launched LinkedIn and Facebook groups, in addition to YouTube and Flickr channels. We are also quite active on Sphinn, an SEM specific forum launched by Danny Sullivan.

Back on home turf, I’ve heard that registrations for SES New York this month are currently tracking double of where it was last year. Apart from stellar marketing, any other particular reasons why?

SES New York is tracking quite well and it will be a great event. Search Marketing is still a very hot topic, one that also is becoming increasingly complex. While title tags, content and links are still very important the most successful marketers are doing much more than that – for instance the integration of Social Media, Mobile Search, Local Search and the more traditional disciplines of TV, Radio and Print.

Over the last couple year’s we have therefore seen increased integration between Search Marketing and the traditional marketing suite, that said there is still a long way to go. Many executive level decision makers, the men and women who make the final decisions on budgets are really just starting to notice the effectiveness of Search Engine Marketing. As this awareness grows so too will the need to educate these high level decision makers and their teams.

Between the increased interest vertically within large multinationals and the increased complexity in getting your pages to rank – more and more people are turning to Search Engine Strategies and Search Engine Watch for Search Marketing education.

What’s your perspective on the evolution of search, with Google having rolled out universal and blended search? How has this changed your approach for online marketing for SES?

Blended Search, or Universal Search as Google calls it, changed everything when it was introduced last year. Basically it has given marketers such as me that opportunity to utilize multiple doorways in our efforts to get listed on the SERPs, especially within those first 10 listings – videos, blogs, images and alike are more relevant today… hence, the YouTube and Flickr channels.

Another adaptation we have made is to treat the blogger community in the search and digital industries in the same manner we treat traditional press (we are the only Conference Series I know of that does this). The press has always been able to access our event, including all the sessions, for free via the press pass, and now the bloggers can too. I do not think a day goes by in which the SES Conference Series and our content sites, ClickZ and Search Engine Watch, are not mentioned on a blog somewhere.

What hasn’t changed? Keyword discovery for one… it is still very important to carefully select the keywords you are optimizing around. E-mail marketing continues to be an extremely effective tool as well, as does select display campaigns and let’s not forget paid search.

As online marketer for an online marketing company, what are your favorite tools that you use to hone your craft? What tools would you like for someone to invent?

This is going to sounds a bit self-promotional, that said, I have been reading ClickZ.com and SearchEngineWatch.com for many years now and I truly don’t not know how any online marketers can effectively execute on their day to day and stay up-to-date on best practices without reading both sites daily.

Who should we get naked with next?

Don Shultz or Seth Godin

In our last Get Naked post, we interviewed PR guru Larry Weber and talked about his new book, “Marketing to the Social Web.” Larry is one of the most social people we know, so when he introduced us to John Palfrey from the Berkman Center at Harvard Law School, we knew we had another great Get Naked story on our hands.

The first paragraph of John’s bio says: as Clinical Professor of Law at Harvard Law School and Executive Director of the Berkman Center for Internet & Society, John’s work focuses on Internet law, intellectual property, and the potential of new technologies to strengthen democracies locally and around the world. John is a Visiting Professor of Information Law and Policy at the University of St. Gallen in Switzerland for the 2007-2008 academic year.

I’ll admit that reading this made me think of that Cracker song, Teen Angst…does the world really need another academic bringing white space ideas down from the mountaintop (literally)? Well, the short answer is “Yes,” and you’ll quickly recognize that John is the real deal. He is one of those unique people that pushes the envelope on far-reaching, abstract topics like cyberlaw and the impact of the web on society, but keeps the conversation grounded so everyone can participate.

My favorite example of this is his keynote address at the IS2K7 conference earlier this year. You’ll see why Harvard Law Professor Charles Ogletree calls him “one of the most dangerous guys around.”

I counted sixty team members on the Berkman Center website – not including emeritus members John Perry Barlow and Zephyr Teachout – what does everyone do?

The Berkman Center is an extremely fun, vibrant, eclectic place. I hope you guys will come by to visit some day – we’re not far from Compete’s world HQ.

Other than having you come over to see for yourself, the easiest way to answer the question is by describing a regular Tuesday at the Berkman Center. In the morning, you might see lawyers like Phil Malone, Dena Sacco, Renee Lloyd and others in conversation with HLS students about on cutting-edge legal matters. There are about 100 or so students who are involved in the Berkman Center’s work each year, roughly 30 of whom are taking part in our cyberlaw clinic.

Around lunchtime, we welcome about 30 people for a sandwich and a conversation about the latest issue in their work, whether it’s for-profit or non-profit, high-tech or low-tech. The lunch crowd includes students, people from the broader community, as well as faculty, staff, and fellows of the Center. Later in the afternoon, we might have someone present on the interesting issues related to their company, like Andrew McLaughlin of Google, Miles Gilburne of AOL fame and now building out ePals, or Chris Kelly of Facebook, each of whom came by recently. Nearer the end of the day, our fellows get together to talk about their work, and are joined by Berkman staff and faculty much of the time. Recent topics include Gene Koo and Shenja van der Graaf’s interests in virtual worlds like Second Life and gaming in education. You might hear the voice of experts on how young people use technology, like danah boyd, piping in from the ceiling (technically speaking, calling in via teleconference). You might hear Ethan Zuckerman talking about issues of interconnection affecting ISPs in Ghana or the changing media environment in Jordan.

The common cause that joins all of us at the Berkman Center is a commitment to teaching and scholarship that is relevant to the changes on the Internet and which has an impact on how we make decisions. Most of us believe in a largely “open” Internet, but we disagree on lots of points, too.

With so many smart people focused on the whitespace of the web, how do you make sure regular Joes understand what you’re up to (and not just perpetual navel-gazing)?

Perpetual navel-gazing is a real hazard. It is also among my worst nightmares.

It’s crucial to us at the Berkman Center that we’re not just another ivory-tower think-tank. It’s important that we do some work that is theoretical and even abstract. We trust also that our work is intellectually rigorous and that our methodologies are sound. But at the same time, we try hard to be certain that we are speaking to an audience online that is bigger than our immediate circle of students and colleagues and other friends.

One way we do that is through our various modes of research, teaching, and activism. We believe in building out into cyberspace as we study it, so we have terrific developers on the team who put up the first blog server at a university, supported the first podcast series, built real-time teaching tools for the classroom, and a whole lot of code for specific research projects. Pretty much everything we do we publish to the web – whether on a blog, on our website, on a podcast, or by video. We are never as successful at this as we’d like to be, but it’s a constant area of focus. We think of our work as relevant to a broad audience and strive to avoid navel-gazing wherever possible.

One project where I think we’re close to getting it right is StopBadware.org. That’s a neighborhood watch where people can tell us about computer programs and web sites around the Internet that are causing problems to their computers. We work with Google to present you with a warning if you’re about to hit a site that may be dangerous to your computer. We also promise that we’ll take web sites and applications off the list when they become clean. It’s been very effective in terms of keeping millions of people from going to compromised sites and also leading to sites and applications getting cleaned up. As with every ambitious research project, it’s still a work in progress, and we’re totally open to ideas for how we can do it better.

Continue reading “Get Naked with John Palfrey” »

As our blog has grown, (we’re one of the top marketing blogs according to Ad Age!), people have suggested that we start to interview the interesting folks that we interact with at Compete. So picking up on the Wired cover story on transparency earlier this year, today we’re launching our “Get Naked” interview series to give our readers a peek into some of the top thought leaders that are shaping the intersection of marketing and the web.

We’re happy and thankful that Larry Weber agreed to be our inaugural interview, and we expect to share more conversations with him on our blog in the future. As a board member at Compete, Larry drops some serious knowledge about the forces that are influencing the globe’s largest brands and marketing services companies (and Muammar al-Gaddafi’s social media strategy for Libya). Larry drips street cred – he created the world’s largest public relations firm, founded the Massachusetts Innovation and Technology Exchange (MITX) and has published two books on the digital world.

Larry’s second book, Marketing to the Social Web: How Digital Customer Communities Build Your Business, was just released in June and makes our conversation with him perfect timing. Larry’s book is targeted at marketers used to doing things the old way, and gives them some practical steps for getting customers involved by sharing and communicating with each other. By enabling communities for customers – rather than market at them – Larry points to new possibilities for the brave and stark realities for marketers that are slow to adapt. If you’re a marketer, this is a great book to read and share with your colleagues.

The opening line of your book says that marketers need to “learn a new way to communicate with an audience in a digital environment.” What does that mean for the average CMO or VP of Marketing? What happens if you’re a bad student?

It means that the Web is not a channel. Social media is about creating interesting and value-added content that people want to come to – not broadcasting to them. It’s not that complicated. It does require being open to new ideas, trying new things and even taking a few risks.

What is the one lesson in your book that marketers can act on now?

Take 25% of the traditional marketing budget and put it into social marketing. Big marketers like GM are already starting to do this.

You have coined some great phrases like “online conduit”, “customer maps” and “word of mouse”. What are they and what’s the social play?

“Online conduits” are blogs, social networks and e-communities.

“Customer maps” means looking at what your customers read and where do they go for their information.

“Word of mouse” – means people share things online

How has writing this book changed how you market yourself and the companies in the W2 portfolio?

We are more deeply Web-based than ever. I now truly believe that Marketing is everything.

How did you get to know so many people?

I built the world’s largest PR firm so that helps. I’ll meet with anyone, listen to what they have to say and try to help them. People appreciate that.

LinkedIn or Facebook?

Neither – with all due respect to my good friend Reid Hoffman of LinkedIn. I like Gather because I think it provides interesting and thoughtful content.

Last question, who should we get naked with next?

John Palfrey, head of the Berkman Center on Internet Law and Society at Harvard University.

So if you are a marketer who is struggling with the complexities of reaching and engaging your customers, we highly recommend reading Larry’s book. And since we have a tight relationship with the author himself, we’ve got a free copy for the first 10 Compete blog readers who email me at sdimarco@compete.com. If you’re too slow to get a free copy, you can get a paid version from Amazon; here’s the direct link: buy Marketing to the Social Web: How Digital Customer Communities Build Your Business on Amazon.

Larry, I think we just created a community of customers around your new book…;)

In this video, Jeremiah and Eric Peterson take us (and Charlene Li) to task on Attention and Engagement.

We are glad that Compete.com made it into their conversation about Attention and Engagement; looks like our Scoble interviews increased awareness of Compete.com’s usefulness for online competitive intelligence and measurement! We’re hell-bent on using our clickstream and survey capabilities to come up with universal metrics in these two areas (frameworks are key, but our view is that marketers need universal measures in order to put their own performance into context - relative to rivals, peers, or anyone else they want to compare themselves to).

Earlier this year, we introduced our Attention metric, and we disagree with the conclusions that Jeremiah and Eric have come to. Attention is a time-based measure, so logically the more time we spend on a site, the more attention we give it. We think of Attention as a pie-chart - its finite - so the sites that are increasing in Attention over time are performing well along this metric. Sure people can cite the issues of multiple browser tabs, etc, but the point is that marketers need an effective way to first identify and then see why sites like www.millsberry.com are so incredibly cool. This General Mills site ranks in the top 1,500 in visitors but leaps into the top 100 in Attention because its members spend over 30 minutes on the site each time they visit it (more than Myspace):

Ask the folks at MillsOnline if they think that total time spent on site is a great way to understand whether they are increasing/sustaining Attention in the marketplace - we bet they’ll say yes.

Here’s another great application of our Attention metric:

Don’t you think this will be a great predictor for which candidates are generating the most momentum between now and Fall 2008?!

Engagement is a different story altogether - and we agree with Jeremiah and Eric. Unlike Attention (a pie-chart), we see Engagement as a spectrum. Worse yet, it is tough to place companies/sites on the same spectrum because of the important “emotional layer” of metrics that need to be considered and that are company/situation specific. Our view is that you necessarily need to use attitudinal inputs gathered via surveys to crack the code on a universal Engagement metric (and we think that Reicheld’s work around advocacy and net promoter scores is a fertile place to begin).

We appreciate Jeremiah and Eric including us in their conversation and would love to advance our approaches with further feedback from them and their collective fans!

It’s good to see Dan Marino and Don Shula working together again, this time pitching weight loss programs for NutriSystem. Yet despite revenue growth of 166% last year, the stock has dipped 30% following a cloudy Q1 outlook from NutriSystem management. This is troubling since January is to the weight-loss market what the fourth quarter is to retailers (and quarterbacks). Is this another case of the Dolphin curse, or will Team NutriSystem remain the most winning duo in NFL history?

On the graphic below, the area graph shows the aggregate time on weight loss sites in seconds and the lines indicate time on the three largest sites as a percentage of the total in the weight loss category for the time period starting on December 1, 2006 and ending on Januay 31, 2007.

Losing weight, gaining attention
Compete analyzed consumer activity on the 58 largest weight-loss sites (a subset of our Health category) to shed light on what’s going on at NutriSystem. Rather than unique visitors, we focused on the daily time that people spent on these sites to better measure how much attention we gave to dieting after our holiday splurge. Well, guilt kicks in quickly: after falling off from Thanksgiving, average daily attention increased 25% the week beginning December 24th, and another 75% the week beginning December 31st. The largest daily increases occurred on December 26th (90%) and January 1st (66%).

The sites commanding the biggest share of attention among the dieting hopeful were Weightwatchers, eDiets and Nutrisystem. In addition to banner-driven traffic, total search referrals from Google to the three domains increased 2.5 times in the two weeks following Christmas (we have found search is a great proxy for consumer demand).

Guilty Mondays
Notice those sawtooths on the area graph? Each peak is a Monday, when these sites capture the most attention. While overall interest decreases during January, our attention is refreshed at the beginning of each week. This creates a prime opportunity for weight loss marketers to convert us into customers – that’s when we’re feeling our guiltiest.

This is where NutriSystem’s January under-performance becomes evident. To better understand how the three marketers performed, we calculated their average daily visits during January and indexed each day to the respective site’s average. Days with above average visits index over 100, and the height of the bar displays how much above/below average each day is for each site.

eDiets and Weightwatchers invested steadily throughout January, synchronizing their marketing with our beginning-of-the-week guilt. NutriSystem, on the other hand, chose a different strategy. The column chart above shows that NutriSystem made a big bet: the company invested heavily in the first ten days of January when demand was the highest. This all-or-nothing strategy missed three important Monday peaks (1/15, 1/22 and 1/29), staking its success on the highly competitive early days of January. The strategy would have worked if NutriSystem had captured more than its fair share of attention and converted it into new customers. Unfortunately, our data and an early warning from NutriSystem management shows that it did not.

*Results not typical
So this leaves NutriSystem in a precarious position. In order to hit $205 million in revenue and 300,000 customers (the midpoints of its Q1 targets) it needs to make up lost ground amidst tough competition and waning demand in February and March. This will be difficult and expensive: Compete data from 2006 and 2005 show that January represents 40% of Q1 visits to NutriSystem, and that visits decrease 25% post-January.

As a result of its January campaign, NutriSystem marketing generated approximately 2.59 million visits to the site. The table above shows a remarkably tight correlation between quarterly site visits, new customers and revenue. Assuming that these ratios hold, NutriSystem needed to achieve 2.79 million visits, 120,000 new customers, and $82 million in revenue in January.

By missing its target by 200,000 visits, there is extra pressure on NutriSystem to convert the visitors it does attract into new customers. If conversion holds steady at its 2006 average (4.3%), this will result in shortfalls to January customer acquisition and revenue targets, misses of 8,900 and $6 million respectively. This would mean Q1 revenue would come in at $199 million, which is below their $200-210 million target. And since every 1-basis point change in conversion translates into approximately $175,000 in revenue, even small slips in conversion are especially damaging. Once again, the magic of Marino and Shula needs to produce a win.