ROI on Google AdWords: Do the Math

June 7, 2012

Small business owners of the world, unite! You are part of an apparently bottomless well of advertising dollars, and the big boys are out to take them from you. Today, in Misleading Advertising Sales…how Google would like you to calculate Return on Investment.

Here’s a look at part of the “lesson” from Google on how to calculate Return on Investment:

Google has left the cost of goods or services out of their calculation. It could be an honest mistake, but this is a multi-billion dollar business, so I doubt that there is anything in the AdWords world that hasn’t passed muster with several layers of management.

I tried to give them the semantic benefit of the doubt, but their wording seems very clear:

“The net profit for your business can then be calculated based on your company’s revenue from sales made via your AdWords advertising, minus the cost of your advertising.”

They could have easily said “gross margin” or “contribution,” but they went with “revenue.”

So Google seems to be deliberately misleading small businesses into calculating their ROI from AdWords campaigns incorrectly, making their AdWords investment seem much better than it really is.

If Groupon doesn’t get you, Google will.

I’m from Groupon, and I’m here to help

May 8, 2012

I’ve been wary of Groupon from the beginning. If you’re a small business owner or an eager investor, I think you should be, too.

Groupon CEO Andrew Mason. Just had a spa treatment for 50% off.

Groupon has now convinced hundreds of thousands of local businesses to offer their goods at 50% off (and pay Groupon for that privilege). After the initial elation of seeing hundreds of bargain hunters at their doors, these small merchants have awakened to the havoc these promotions have wreaked on their income statements.

But wait. Groupon’s not done with you, Mr. Bill’s Bird Seed. There’s more, Ms. Signs R Us. Now that Groupon has shaved your profit margins down to almost nothing, they’re here to help.

In his most recent letter to shareholders, Groupon CEO Andrew Mason says, “we plan to offer a fully automated yield management system for every local business. [Booking management system] Scheduler embodies our intent to provide every mom and pop store with powerful technology solutions that were once reserved for sophisticated corporations with multimillion-dollar budgets.”

“Yield management” is consultant-speak for the process of analyzing and fine-tuning gross profits vis a vis promotions, discounts, coupons, and the like.

That’s right: now that Groupon has cut your margins to the bone, they magnanimously offer you sophisticated software (at a price) to help you scrape by.

If you’re a small business owner, the wise response to Groupon is, “thanks, but no thanks.” There are better ways to generate demand for your products and services. A steady program of solid advertising plus strategic use of social media will insure long-term viability. Let your competitors price themselves out of business with Groupon.

If you’re an investor, eager to jump on the Groupon bandwagon, note that that bandwagon is rolling downhill.

The (Rails) times they are a-changin’?

April 26, 2012

I always knew we wouldn't last forever.

I just attended my first RailsConf, and I feel a little sad.

Oh, the irony. I attend my first conference devoted to the development tool I’ve been devoted to for the last six years, and my overwhelming feeling is that it’s time to move on…to a new development paradigm and a new toolset.

What I heard from DHH, Aaron Patterson, and Yehuda Katz in their conference addresses was this:

“The web dev paradigm is shifting under our feet. All the fun is moving to the browser, which means to Javascript. Weren’t we prescient to embrace REST years ago so that we can now become a great web service platform, dishing out JSON from a thousand endpoints of API light as a sort of workhorse for the sexy stuff the JS guys and gals are doing. (If we hadn’t done that, we might already be a dinosaur.)

“Oh, and be prepared, because we may do something crazy. Like coming up with some sort of browser/Javascript framework for Rails, because we want to do the sexy stuff too.”

Oh, Rails. The writing is already on the wall, I’m afraid. The future web dev paradigm is already being speedily developed. (If I had to pick its embodiment right now, I’d lay my money on Meteor.)

Ruby is a fantastic language. I am not even a 7 with Javascript. But my new projects, at least the side ones, are going to be in Meteor.

Jack Welch said, “Change before you have to.” Don’t wait too long.


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