Business Bricks

Colin Rainsforth says:
Sure. What Jakob is saying is that ‘pay-per-click’ (PPC) advertising on search engines (eg: Google AdWords) is an unstainable model for driving on-line sales and that there is too much focus on this in the business community when defining web strategies.

To reap long-term value from their sites - and sustainability for on-line businesses - companies should be putting more effort into fostering customer loyalty so that search engine traffic (and indeed traffic from other forms of marketing) is converted into repeat traffic and sales.
by Colin Rainsforth on 16 Jan

Iain Row says:
Very clear synopsis. I have a slight problem with the bit where Jakob says:

The competing sites will also double their conversion rates and can then afford to double the bids for their search keywords.

I don’t see why a competing company that also improves its conversion rate, and therefore makes a healthy profit, should throw it all away by doubling their bid, just because they can afford to. By the same token, businesses don’t usually invest in new processes to make their production more effcient, and therefore cheaper, and then sell their goods for $1 more than the cost of making it. Such competition might win them customers in the short-term, but is very difficult to sustain in the long term.

In fact, Jacob’s model looks a lot to me like the hypothetical economic construct of perfect competition, one of the key indicators of which is that no firm makes any profit (whether they use PPC or not!).
by Iain Row on 18 Jan