Why Referrals Matter

February 10th, 2010

I was just reading a post by Aaron Wall (of SEOBook.com) about how successful people, especially in the Internet Marketing arena, seem to become jerks as they become successful.

It’s SEOBook, so obviously it’s a great post, but it got me thinking about another topic that comes up a lot: Untouchable Marketing’s Marketing.

It’s a pretty common joke around the UM offices that this company has never had to avail itself of its own services. Sure, we show up for searches like “denver web marketing consultant” and we’ve done the minimum due-diligence on optimizing our site, but the point is that exactly 0 of our current clients came to us via the contact form on our website.

So how did we get enough business to sustain the company? 100% referrals.

Why Referrals Are So Great

In Million Dollar Consulting, Alan Weiss talks about peer-to-peer referrals being the ‘Platinum Standard’ of marketing for a consulting firm, and I couldn’t agree more (he also mentions that you should carry a nice pen, which is something that I do not agree with, as the Pilot G2 is the finest pen ever invented).

The standard explanation for why referrals are great is that there is no better way to convince someone that you can deliver what you say, than to have his friends convince him for you.

However, I think referrals are great for another reason: screening.

In the world of business (as you can read in Aaron’s article referenced above) there are people who want the universe for a nickel. They will bargain, argue, and tear apart every single line item in a proposal. In the end, they aren’t happy with the results.

By getting a referral from a mutually-trusted acquaintance, you end up screening potential clients ahead of time. It’s unlikely that the small-minded “deal-makers” who want to nickel and dime you to death would be friends with your better clients. Their personalities are incompatible.

Personal referrals protect both the client and the consultant, and that is why I always recommend that you find a Web Marketing Consultant the same way you would find a good Lawyer or Accountant; because if they have resorted to spending money on advertising, then they need your business.

Keep in mind that the consulting world is very different from most other industries. If you have a repeatable process that would apply and show results for 90% of your clients (think software like Quickbooks, or an office cleaning service) then you really just want to get the word out to every applicable lead that you can. And that is why there is a vast market for what we do.

Tags for This Post: marketing consultant, pilot g2, alan weiss, personal referrals, due diligence, denver web, nickel and dime

Benford’s Law and Click-Through Rates on SERPs

February 4th, 2010

The other day, as I perused the latest “nerd news” from news.ycombinator.com I came across a very interesting blog post that captured my attention. It was a summary of the properties of Benford’s Law.

By way of brief introduction, Frank Benford first became aware of this property while working at General Electric, when he noticed that pages of a book containing logarithmic tables showed much more wear on the page for the number 1, than they did for other numbers.

After considerable research, he found that any man-made data has a tendency for the leading digit of each number to be a 1 around 30% of the time, and a 9 only about 4% of the time. This is true with tax returns, baseball stats, and just about any other data you can name. This is very odd, because one would assume that the numbers 1-9 follow a normal distribution (and they do, when generated randomly).

This article stuck in my mind, and somewhere over the last couple days it connected with something else that had been bothering me.

Benford and Search

By now, you probably know about the research that was done on the AOL Study Data that gave us a baseline for click-through rates on search results. This study showed that the number 1 result on a page gets clicked on about 35% of the time. The graph looks something like this:

AOL data CTR

Although this data has been very useful, what has always bugged me about it is that the study was only performed on the first 10 results, and so the only way to extrapolate a formula would be to graph the results, add a trendline, and use the equation of the trendline to predict other values greater than 10.

But take a look at this graph of numbers following Benford’s law (which has a known equation):

Frank Benford's Discovery_1265314649134

Eerily similar isn’t it? Putting the numbers side by side really makes it obvious that there is an interesting correlation between Benford’s law and SERPs behavior.

Result # % of total traffic Benford’s
1 35.64% 30.10%
2 17.82% 17.61%
3 11.88% 12.49%
4 8.91% 9.69%
5 7.13% 7.92%
6 5.94% 6.69%
7 5.09% 5.80%
8 4.45% 5.12%
9 3.96% 4.58%
10 3.56% 4.14%

Hammering Out the Details

First I took the equation for Benford’s Law and fed it the inputs of all numbers from 1 to 100. Unfortunately, beginning at #11, the numbers depart from what my gut feeling is on the actual click-through for pages beyond 1.

For example, the equation tells us we could expect a ranking at #11 to receive roughly a 3% CTR. Obviously, this seems high for the first result on the second page. But what if we assume that a similar number of people will click on the 10th result as will click on the ‘Next Page’ button?

Point of Clarification: The original algorithm provides for a 4.14% CTR on the 10th result. Assuming that another 4.14% of people will scroll down the page and click on ‘Next Page’ we use that percentage as the total amount for the next page.

Download an XLS file with the comparison and formulas.

By applying the same equation to the percentage of people who are predicted to click on #10, we see that roughly 1.14% of searchers will be predicted to click on #11. That seems reasonable, doesn’t it? I would say about 1 out of 100 times I will hit the second page of results and click on one of the listings.

Using this formula, it is predicted that searchers will basically not go past result #110, which is a pretty good prediction based on everything I’ve ever seen about search.

It’s All Voodoo

Of course, much of this is just arbitrary tinkering with numbers. But there is a great body of evidence that says that Benford’s law has applications to any human system of data.

Because search engines are merely aggregating data and applying a formula for ranking, it makes sense that it may be subject to some of the same underlying laws as the stock market, baseball stats, and other masses of human data.

Tags for This Post: aol study, logarithmic tables, nerd news, trendline, baseball stats, frank benford, couple days, normal distribution