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Ellen Siminoff is the CEO of search advertising agency Efficient Frontier, having previously been part of the founding executive team at Yahoo!

Efficient Frontier applies mathematical models developed on Wall Street to calculate the best keyword prices and positioning advertisers should go for, and now manages over $250m in media spend.

Having recently launched an office in the UK, she talked to us about the company's plans to expand globally and into new areas of online advertising.

Why have you decided to target Europe now?
It made sense for us to expand because we had a few clients in the US that said ‘we’re in Europe, you should come too.’ Once we knew enough to be able to service clients here, we decided to set up an office. The market was ready and we had enough of us to bring over here for it to work really well.

It doesn’t mean the US isn’t growing. Many companies in the US make the mistake of thinking only about the US, but in this space you have companies who want to buy anywhere around the world at any time.

Where do you plan to go next?
The most likely other markets will be France and Germany. A lot of clients; their view is beyond the UK. In addition, we will be bidding soon on our first Japanese client, so we are approaching Asia as well.

What was your reaction to Yahoo!’s results coming in below expectations, and what that means for the online ad market?
People ask me a lot whether this is a bubble. The answer is it’s not a bubble, in that everybody that’s spending is getting a good return. It’s a question of how aggressively people can grow.

You’re seeing, with Yahoo!’s quarter, that there are lots of different ways people can buy. It’s getting more complex. Back in 1999, you either needed to deal with AOL or Yahoo! to get reasonable mindshare.

What do you expect to be the impact of Panama, Yahoo!’s new search ad platform?
It hasn’t really launched, but I think that net, it will be positive for marketers, especially those with strong brands. If you have a good brand, it should help you float to the top and you should be able to get more qualified clicks.

In order for it to achieve Yahoo!’s objectives though, it has to help them monetise their pages better. To do that, people have to get more conversions and not more clicks at lower conversion rates. But until it’s out there, nobody knows.

What about your business?
The way Yahoo! works today, if you want to bid on a word, they tell you what you need to pay for each position.

With Google, they have a traffic estimate that gives you the page views and there’s a quality score, of which click through rate is only one piece of, times your bid position. With Google, you need a mathematical model to figure out what to bid on Google, which is what we’ve been doing. With Yahoo!, you just make a decision. We’re used to working on a marketplace that is not obvious, that requires a lot of analysis.

We like complexity. We operate great on Yahoo! today, but we’re uniquely positioned for the new marketplace.

Because our approach is very mathematical, we work very well on Google Marketplace which is very opaque, and with Yahoo! Panama being launched, we are in a very good position to manage spending on that.

What do you think has been behind the pressure on keyword prices, and where do you see them going from here?
There were people bidding without a lot of sophistication. As you get more sophisticated the level of pricing will change. As of two years ago, less than 15% of people were measuring what their ROI was, they were just managing the clicks.

People didn’t have real business models and exited some markets, but there are also markets which are still quite hot. Financial services, for example – with interest rate changes, what people are willing to spend has changed.

But I don’t see them really declining. You will see a lot more entrants to the marketplace - people are spending 20% or 30% of their time online but only 10% of their media dollars. I think it was more of a pause than an ongoing trend.

What other areas are you looking at of online advertising, other than search? What is your R&D team working on right now?
We spend a lot of time looking at keywords. We have applied for a number of patents on keyword generation, thinking about the most appropriate keywords for our customers and being able to grow campaigns without spending a lot of money on keywords that don’t work.

We have also been doing some tests on banner re-targeting – where we work with Google [so that] people who have been on search and clicked on an ad and not [been converted] can be re-targeted at some point.

Eventually, we see ourselves as an optimisation engine for all digital media, but we started with the most complex part. Search is the hardest because it is vibrant, it’s competitive, but our approach is very dynamic.

When do you see the banner re-targeting system coming out?
The banner re-targeting is a this year thing. We’re also going to start tracking organic search so that we can at least understand the relationship between natural and paid search. We’re also tracking the shopping engines to understand the relationship between shopping and paid search. So we’re expanding.

What impact do you think the Google-YouTube deal will have on the paid search space?
The Google thing is very interesting because it’s going to take us in the next direction of search, the next kind of media. How is Google going to take this video content and monetise it? Is it going to get monetised through performance marketing or will it be branding? How do you play these rich media spaces?

It’s a fascinating time. Dollars are shifting but it’s not immediately obvious how things are going to look in five years’ time.

I think everyone looks at $1.65bn as a lot of dollars, but it is less than 2% of Google’s market cap, and they were able to lock up the largest video audience. It’s not monetised yet but they will be able to figure it out. They will work through copyright issues and how to monetise it.

But Google, historically, started to differentiate itself by being able to index images really well. So being able to index video and audio and having this relationship where people upload their own videos will be incredibly powerful.

How concerned are your clients about click fraud?
If you look at the tier 1 sites, which is where we are, you will find that most of the click fraud is outside them.

I’d be very careful outside tier 1. You should look at individual sites with low conversion rates and you can get them eliminated from your network. When you also track to ROI, you’re sensitive to irregularities on keywords and you can get money back. As long as you apply ROI metrics and you’re sophisticated about it, you can deliver the right results.

Even though you see a lot of articles about Google and Yahoo! and click fraud, they don’t want it. It’s bad for the marketplace. Even today, they don't charge you for every click.

What advantages do you feel paid search has over search engine optimisation?
Everyone thinks organic is free. It’s not, because typically everyone who’s working with an agency has two guys working on making sure they get index-tied. So it’s not free, but having said that I think you should try and follow the right rules and have the right tags.

The problem with organic is it is not reliable. You can’t call Google and yell at them if you drop down the results, because you’re not paying them. There’s only so much you can do. With paid, you determine what the right words are, how high you bid, how you market to people, so you have total control. You can also toggle your spend up and down.

You need to do both effectively. But with any marketing programme, if you have control and visibility you have more power over the channel.

What’s your position with financing and profitability?
We’re absolutely profitable. We have $250m ad spend under management and you can apply an agency percentage against that. We have only raised $12m in total and we’re very serious about Europe and we’re very willing to invest here. We didn’t have to go and get financing.

Any thoughts on an IPO?
I don’t think we’ll do more financing. With the IPO, who knows? One thing Google taught us is if you don’t need to go public, wait as long as you can. The challenges in the public market are just tremendous right now.


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Published 31 October, 2006 by Richard Maven

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