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With all that’s happening with the economy as of late I’ve been very interested to learn how the current and future economic state will affect the search marketing industry. The guest economist is a good friend (featured on the Squareoak blog before) who is an economic consultant for a research firm in New York City.

Thank you for taking the time to talk with us today.

My Pleasure

I’d like to pick your brain about how the economy’s downturn might affect the search marketing industry. Year to date, Google’s stock is down, Yahoo is laying off between 10 and 20 percent of its staff…things seem to be happening that would indicate an economic recession. As search marketers, what do you think would be the best indicators to look at in order to best gauge how our industry is going to perform?

I would expect that search marketing would fit general advertising trends, at least to some extent. It’s expected that advertising will trail the economy in a recession: advertising budgets are usually committed in advance, companies don’t want to cut back on advertising and decrease their sales unless it’s clear that consumer spending is going to be less responsive to advertising, and they’re not likely to make big moves on their advertising budgets until they feel the effects of decreased revenues. Search marketing isn’t exactly like other advertising, however. Search marketing seems a little more essential than a huge Superbowl ad, for one. Also, search marketing — just because of the nature of the internet — can be more international than other advertising, so it might be less affected by a US recession. But it is certainly not immune — and when consumers stop buying as many goods online and companies don’t have the money to spend on campaigns anymore, search marketers are sure to feel that.

So say the economy is totally screwed and we are in fact going into a recession. Do you have any advice on how to protect ourselves?

Well let’s first back up to how that would even affect you. A lot of people will speculate on it — but to find out with a little more specificity, you’d want to regress, or find the correlation, between overall advertising budgets and various economic indicators we’re seeing now — consumer goods (particularly non-essential goods), changes in the Dow, the consumer price index, even what people call “leading indicators” like Starbucks revenues (supposedly go down before a recession) or lipstick sales (supposedly go up in a recession because they’re a small indulgence). Once you predict where advertising is going in general, then you want to find trends in online advertising as a part of those overall budgets — if online advertising is growing as a percentage of overall ad spending, then search marketers are much less likely to feel the recession than print media, for instance. Basically, that’s what you want to focus on — showing that returns per dollar spent on search marketing are larger than those for print media — and that those returns are less elastic, or responsive, to overall changes in consumer spending. Furthermore, you’d want to show your customers that search marketing is a necessary cost of doing business – just as important as any of their fixed costs. People aren’t going to take down their company website during a recession unless they’re bankrupt. If people believe that showing up in a search query is just as important as having the website in the first place, they’re not likely to cut down on those budgets.

Also, you could seek out customers in recession-proof industries. These are often thought to include health care, pharmaceuticals, groceries, utilities, and even “necessary vices” like cigarettes and alcohol (but I’d seek out Miller, not Krug)

So for the most part you’re saying that our industry is probably ok? Or at least less susceptible than other advertising channels.

I would think that it should be less susceptible than other advertising channels, but even very recent history reminds us that internet companies like Yahoo are certainly not recession-proof. Nevertheless, there are certainly equity analysts like Piper Jaffray on your side, who say that online advertising should be immune to a recession.

That’s a relief. I just hope I won’t have to get into online lipstick sales [smile]

Another boost to you is that people will be spending a lot on online advertising for the upcoming elections.

This is true…

Looking at Techcrunch today…there is a lot of VC dollars being thrown around. One acquisition includes that of Cleverset for $10 million to Art Technology Group which is an e-commerce software company. If there are people making large investments in e-commerce then I should hope that the online economy has a slightly different agenda.

Certainly. Analysts and investors certainly seem optimistic about online advertising and business, which means that dollars are more likely to be coming your way — but that said, this is a sector that we’ve had little time to observe in terms of how it responds to macroeconomic shocks. Analysts certainly miscalculated the future of wild growth in Silicon Valley. This doesn’t mean that online advertising will follow a similar path, but it does reinforce that a lot of this is pure speculation. Nevertheless, the forecast is good.

So turning back to the US economy as a whole, what are some other economic indicators to look out for? Starbucks sales should drop and lipstick sales go up? What else?

Well, the Conference Board follows an index of leading indicators that are supposed to predict where the US economy is headed. They found that this past December, four of the ten indicators increased: namely, were vendor performance, real money supply, stock prices and manufacturers’ new orders for consumer goods and materials. However, 6 of the ten took a turn for the worse: were building permits, average weekly manufacturing hours, manufacturers’ new orders for nondefense capital goods, average weekly initial claims for unemployment insurance (inverted), index of consumer expectations, and the interest rate spread.

Historically, are presidential elections seen to hurt or help the economy?

The effect of presidential elections on the economy is not uniform, but a study published in the Journal of Financial Research in 2006 finds that in elections that do not have one dominant candidate, stock market volatility (risk) and average returns rise. Also, special interests play a role in elections, and candidate-favored businesses or firms are likely to do better (or worse) based upon polls and eventually, the outcome of an election. I would imagine that if the population considers that the incoming president had a strong economic policy, there would be a short-term positive effect on the economy as a whole and consumer spending. Long-term, any changes would depend on the actual efficacy of the president’s policies. Researchers are puzzled, however, by the fact that the excess return in the stock market is higher in Democratic than in Republican presidencies, which is not explained by business-cycle variables.

I’m not as familiar with how elections affect the economy once it already seems headed for recession — even if there is a significant effect, I’m not sure how long-term this would be. This 2008 election will certainly be driven by economic factors. That’s clear just from hearing the debates so far. People are very concerned about spending policies, balancing the budget, social security, and protectionist/free trade policies.

Well with all that has been said it’s comforting to learn that our industry is more impervious than others when it comes to economic recession. Thank you for taking the time to talk with us about this today.

My pleasure. I’ll keep my fingers crossed. [smile]

As will I [smile]

In 2005 A film producer named Wolfgang Thaler released a documentary called Ants, Nature’s Secret Power. I was lucky enough to watch this documentary on a very late Christmas night and found something extremely interesting that parallels the daily lives of Search Marketers and Social Media users. This thought has remained in my head for almost a month and will now live on this blog…

Bert Hölldobler is the featured professor in this documentary that has dedicated his life to understanding the world of ants.

“There is an immense diversity in this insect group but there is one common feature to all ant species. They all live in societies they all are socially in sync. There’s not a single ant species known that lives solitarily. The evolutionary transition from a solitary life to a social life occurred only in about three to five percent of all animal species, including our own species the Homo sapians. But this minority places an overwhelmingly dominant role in almost all land habitats.”

We are surrounded by other species that are equally as social as we are. What makes these ants so interesting is that they are an example of this social construct on the most basic level. They don’t have emotions, they don’t have bills to pay, they have a preprogrammed disposition on how to exist. They exist individually because they are many. Since their individual survival depends on the success of this ant state, they have to maintain their efficiency through organization and coordination via communication. So how do they talk to each other? How do they spread the word? How do they make their content go viral?

Rattan ants live inside the stem of climbing palms found in tropical climates. In the documentary they show the accidental destruction of a rattan ant colony. The colony scatters, some ants guard and protect the larvae while scout ants spread out in all directions in search of a new home. Here comes the interesting part. While the scout ants are looking for a new home base…

“they touch the ground with their bodies laying down a broken line of scent. Scouts that find a nest site lay down more scent and other ants follow their trails. They in turn lay down more scent. So one site is selected from many by a chemical democracy. There is no leader giving orders. The site is chosen by the community through the strength of the chemical trails from the scouts.”

Right, what does this remind you of? Digg? StumbleUpon? Reddit? It’s the ant version of social voting! Where we use numbers (symbolic/visual representations of quantity) ants make a collective decision based on the intensity of a chemical scent. It makes you think about different social voting models. Digg, Reddit, Propeller, and Mixx are the same in that they all display vote count. Whereas StumbleUpon is the odd duck in that they simply show you a site that is usually liked by other StumbleUpon users. The more a site is liked, the more it is shown.

Imagine what a social voting site would be like based on our other senses? Maybe the more popular a story is the more vibration it generates or the higher the pitch. Maybe consumers could visit an online perfume store and vote for their favorite scents. What if you had an social alert system setup where the intensity of your iphone’s vibration was based on the importance of the alert? Could this benefit the blind?

There are probably thousands of possibilities for different social voting models and their applications. When we look deeply into the world around us, inspiration can come from the most inconspicuous of things. In many ways I feel we’ve only reached basecamp when it comes to social media. It will be interesting to watch how social voting models evolve and how clever we can be at harnessing technology to bring us the most important information democratically.

Brendan – Tim I want to thank you for taking the time to talk with us today. Can you tell us a bit about what you do?

Tim – I’m a jack of all trades, my company specializes in reputation management and SERP control, but I have a wide range of interests and am particularly fascinated with social media optimization which has been the focal point for my research in recent years. I’m probably best known for my work studying StumbleUpon users though I don’t just limit myself to one particular group.

Brendan – From what I understand you have quite an impressive academic background. Can you tell us a bit about that?

Tim Nash – Not much to say went to university studied became far too anal for my own good, before realizing that before hiding in a university your entire life that you need a life. It’s sad that my ideal retirement job will be hiding in a dusty lab once more.

Brendan – You’re currently teaching at a university aren’t you? Computer science?

Tim – Two universities are blessed with my current teachings in ‘Internet Technology’ which is becoming a discipline in itself. My current classes include Information retrieval and an introduction to search engine optimization (though I have renamed this unofficially to SEO for the damned)

Brendan – [Laughs] Sounds fun. Are you or your students working on any exciting projects pertaining to these disciplines?

Tim – I have a few projects on the go at any one time; my current projects include more reliable methods for tracking users and user actions, studying user voting patterns and a means to identify possible “gamers” on standard Pligg systems. I also have little G, my pet search engine which I use for demonstration as well as a research tool.

Brendan – Very cool. If readers want to read about what you’re working on where would be the best place to find you?

Tim – I have 3 blogs, For social media information Venture Skills Blog is the place to go. This is also where I try to release big research pieces such as our research on Social Begging and of course the Mathematics post. My other two blogs Tim Nash SEO and Payment Blogger are for SEOs and people looking to optimize or monetize sites rather than the search for traffic. They are also a place for me to chill and have a more relaxed time.

Brendan – Above you mentioned some research pertaining to StumbleUpon. Can you tell us what you’ve found thus far?

Tim – How long have we got, I have spent the best part of a year studying StumbleUpon and its users. A very condensed version of how I perceive StumbleUpon itself to work was laid out in the slightly controversial StumbleUpon Mathematics post which presented a very basic piece of math to give people a chance to see some of the factors at work. But I have also spent a fair amount of time earlier in the year looking at Digg and StumbleUpon and comparing the two and while 8 months is a lot of time, both of those posts are still relevant though perhaps some of the factors have changed a little. Certainly while StumbleUpon has continued to grow, Digg has seen a slide away from being the top dog in town.

Brendan – Yeah I think the community has definitely noticed Digg’s decline. What do you think the future holds for them?

Tim – Digg has certainly had its peak and is now like its predecessor Slashdot moving into a second phase where it quiets down a bit, the trolls will move on to new pastures like Mixx perhaps and you will be left with Digg going back to its routes, 17yr old adolescent males and their interests. One thing that is a bit of an enigma is Digg’s fascination in politics which would seem to fly in the face of its average user.

Brendan – That IS odd. Do you think this anomaly is due to people like Ron Paul hiring social media experts to exaggerate their popularity? Furthermore, what percentage of Digg users do you think are search marketers?

Tim – While I’m not very much up on US politics it certainly seems to be that several politicians have recently spent a lot of money chasing after the social media vote. The question is what sort of results these campaigns are getting I suppose we will know if they are elected.

Tim – I think that in reality the number of search marketers on Digg are quite small though they may well have multiple accounts, but the amount of noise they make gives the perception that there is a large crowd and perhaps account for some of the bad blood between the Digg crowd and marketers.

Brendan – What do you make of vote purchasing services like Subvert and Profit?

Tim – They have little or no chance of working over the long term, certainly from StumbleUpon’s point of view the algorithm naturally will discount any long term use and Digg’s unofficial moderators no doubt have their own methods of detection.

Brendan – Between Digg and StumbleUpon, which model do you like best and why?

Tim – StumbleUpon has the excitement of not knowing what’s coming next so from the users perspective I find it great way to spend a few hours. The Digg model is great if you already have a preconceived idea of what you are looking for, or are looking for something recent and new. It is after all a news site.

Brendan – Now correct me if I’m wrong but word on the street is you’re starting a membership type site?

Tim Nash – Yes. I’ve been planning on setting up a membership site for a while now aiming it at the intermediate to advanced SEO/SMO users. Since my original idea several member sites have appeared so I hope people will still be interested in what I have to offer.

Brendan – I think the interest will be based on the level of the content’s quality and judging from what you’ve published in the past, I’d be willing to bet that your membership site will be quite successful. When do you plan on opening the doors? Do you have any promotional offerings for your future members?

Tim – I’m hoping to open the doors at the start of next month as for what will be on offer, the opening content will include a few useful tools such as a working example of my Mulldina strategy as a WordPress plugin, a short course on tracking social media users, several articles on our recent research and an Ebook “The Social Media Mechanic “ which will also be available separately a month later. The goal is to add at least one or two articles a month along with additional tools and courses. The price for all this will be set reasonably low no more then $20/month.

Brendan – Wow that IS reasonable. Jim Boykin recently released his Internet Marketing Ninjas membership website at a membership rate of $250.00/month. I haven’t heard the reviews yet but maybe that’s because no one’s signing up at that price point. $20.00/month makes way more sense. With quality content at a rate like that I’m sure you’ll drum-up a large member base.

Brendan – Lastly, is there any juicy knowledge you could share with our readers today about social media or tips and tricks pertaining to the sites therein?

Tim – People chase numbers and very understandably but if you are using social media to gain backlinks to your site it is often worth ignoring the big sites and finding your local niche media site such as Sphinn. These sites often require only a few votes to become hot and so can be a great place to garner the initial push which in turn will lead to more votes on the bigger sites. If using these sites, one very simple trick is to look at the up and coming lists, when your site gains a few votes start voting for posts near the top of the up and coming while ignoring posts below your own. This will help your site rise a little more quickly. Ultimately it’s about getting the right people to see your posts and that’s what we all want after all.

Brendan Picha – Fantasic advice Tim. Thank you for speaking with us today. One last thing…Does your new membership site have a name yet? What can our readers be on the lookout for?

Tim – Very sadly the current working title is members.timnash.co.uk [laughs]. However any suggestions appreciated from you or your readers but as it stands the site will be part of timnash.co.uk rather than its own name unless someone can come up with a great suggestion. Social Media Ninja seems to be out.

Brendan – Maybe we can come up with a few names and have a vote. Winning name and contributor of said name gets 3 months of free membership access?

Tim – Maybe a month and certainly a few copies of the Social Mechanic could be found.

Brendan – [Laughs] sounds good. Ok Tim thanks again for talking with us. Be sure to let us all know when the membership site goes live. We’re eager to check it out.

Tim – Will do.

Well the Post Toaster project has gone exceptionally well. We’re getting a lot of good responses and requests from people asking me to add new sites to the list. I think my best media mentions were from Lee Odden on TopRankBlog and WebProNews. Post Toaster’s announcement on Sphinn went hot and although I haven’t listened to it yet (hasn’t published), I’ve been told that folks were talking about it on Mixx’s Social Blend podcast under the MixxingBowl blog. I do have to hand it to my man Jason Falls for being the very first person to pick-up on the project. As soon as he heard he threw up a blog post in no time. His post talks about the site lacking a bookmarklet but no more. Good news Jason, Post Toaster now has a bookmarklet which was created and uploaded last night. Lastly, I need to mention and thank the ninja coder Tim Nash for helping me create the bookmarklet. Not only is Tim absolutely brilliant when it comes to pretty much anything online related but he’s an awfully nice guy too.

Well I finally finished it. It took about 25 hours but it’s done for now. Post Toaster is a social bookmarking tool that speeds up the bookmarking process. PT contains a little over 60 bookmarking and social news sites. You have the option to select between all social news sites, all social bookmarking sites, or sites that do not support the nofollow attribute. I use services like this all the time however the stuff that was previously out there now isn’t really cutting the mustard. They don’t have all the sites I use or nearly enough of them. So I had to build my own. Let me know if you like it, have suggestions, or want me to add your favorite site to it. Right now it is missing a bookmarklet but I’m working on that Enjoy!

Post Toaster – Social Bookmarking Tool – http://www.posttoaster.com