Last fall when Google started in with the Quality Score, it caused a real big shakeup in the PPC arena. Bids increased dramatically, affiliates were taking a beating, and all around people using Google’s AdWords system were crying foul. Over time Google has adjusted their Quality Score system and has fine-tuned it now to the point that they are at least willing to openly talk about how it is calculated into your bid price and how you can use the information they provide you with to better understand your Quality Score.

At the time that the Quality Score got started, my first reaction was that Google is going after the affiliates by artificially driving up the click prices. If Google could price affiliates out of the market, affiliate sales would drop and the companies selling would have to go directly to Google to be able to make those sales again. Google would then be able to charge a premium to companies wanting to get back the sales that their affiliates once generated. By the time Google got around to having their own CPA/Affiliate Sales program, the damage to affiliates would be done and Google’s profits would be up.

Flash forward to now, Google announces that profits are up 69% due mostly to their core search and advertising businesses. In fact, a New Yorks Times article had this to say about how profits rose so sharply:

For example, Mr. Schmidt said that just as in previous quarters, the
company devoted significant resources to continuing to perfect the art
of linking search results with ads that are tailored to users’
interests. Since, Google is paid when users click on an ad, those
efforts translate into higher profitability.

“We are showing fewer ads and those ads are worth more because they are better targeted,” Mr. Schmidt said.

That’s right, Google is showing fewer ads at higher prices because of the quality score inflating prices. Couple that with all of the recent news about Google now owning the 3rd largest affiliate company out there, Performics, and you have a perfect storm for what’s coming next…

Google buying Performics by way of DoubleClick gives them the ROI performance data for A LOT of different affiliate programs. That means that now Google knows that Product A which costs 10 cents a click converts about 1:20 or at about $2 per conversion, YET, the merchant is willing to pay $20 per conversion. Now, if Google cut out the advertisers on those keywords and made themselves the only advertiser on those keywords(or even the top advertiser) their profits go up by 1,000% in that niche. Multiply that times however many affiliate products there are out there and that’s where Google is probably headed.

This all boils down to the fact that Google realizes that they are only harvesting in some cases 10% of the value that their search engine generates. I guarantee you that Google plans to harvest a lot more than 10% going forward and the latest news about Performics and their financial performance only supports my view on that.

It’s that time of year again. The holiday season. Thanksgiving, Christmas, etc… are all coming in the next two months and that means one thing. These two months are when more than half of all yearly retail shopping occurs. More than that, this is the time of year when some extremely hot new gadgets and gizmos are released to the ravenous masses. If you know what is going to be hot, then you can make out like a bandit, so I’m going to give you a few ideas on what is going to be smoking hot and what is not.

Playstation 3 - This month the Playstation 3 launches and it’s going to be big. The Playstation and Playstation 2 each sold over 100 million units and billions of games, so the Playstation 3 is sure to sell a lot. However, due to the Blu-ray drive in the PS3, Sony is having production problems and is only going to have maybe 1 million consoles available in the U.S. this holiday season. Last year with the Xbox 360 launch there were only 1.5 million consoles available and this caused a huge shortage. The Playstation 3 shortage is going to be much worse and so getting a console is going to be nearly impossible. Of course, the upside is that if you can get a PS3 on launch, they will sell on eBay for more than $2,000, so this could turn into a great opportunity to sell or promote the PS3 this year. Verdict - Hot

Nintendo Wii - The Nintendo Wii is the dark horse in the next generation console war. It’s cheaper, less technically capable, and it looks to deliver more fun to the masses. The buzz on the Wii is huge and unlike the PS3, the supply will be excellent. Nintendo is planning on shipping 4 million worldwide, so the United States should get 2+ million of those. At $250 with a game included, this is a no brainer gift for anybody who loves games. The Wii won’t sell for a ton on eBay, but the Wii still boasts a lot of opportunity for the clever marketer. Verdict - Hot

Microsoft Zune - Zune is a potential iPod killer, well maybe, eventually, someday, perhaps, maybe not. The Zune is Microsoft’s first real attempt in taking on the iPod head to head and I think it will do fairly well. The problem with the Zune is that it is going against six generations worth of innovation in the iPod. For a first attempt, the Zune sounds like it is a solid music and video player, but this holiday season is not going to be that big for the Zune. Verdict - Not so Hot

Apple iPod - It’s the old standby and you can’t really go wrong with the iPod. It plays videos, music, and television shows better and easier than any other music device. Now with the new shuffle and nano models, it a sure fire winner. It might not be as big as it was last year, but it’s still going to do well this year. Verdict - Hot

Tickle Me Elmo TMX - Whenever my parents tell me something is hot, then I know it’s got to be something big. In the case of the TMX Elmo, they told me about this before I had heard much about it elsewhere. It’s selling like crazy on eBay and is going to be very big this year. Enough Said. Verdict - Hot

LCD HDTV - This is more of a general product, but it’s going to be hot finally this year. LCD HDTV’s are finally getting cheap enough for people to buy them. 32″ LCD’s will be had for under $500 on black Friday and that will drive a lot of HDTV adoption in the next few months. There are a lot of other angles that can be taken to tap into the HDTV phenemenon such as high-def movies, video games, cables, etc.. Verdict - Hot

HD-DVD and Blu-Ray DVD - This year both HD-DVD and Blu-Ray DVD launched and nobody really cared. While many are touting these as the future, the uptake is extremely slow. While the PS3 is going to have Blu-ray built in, every High-Def disc player is $500 at the cheapest, so this year is not going to be the year for either format. In a few years they might be hott, but this year both formats are cold as ice. Verdict - Ice Cold

So there you go, those are just a few of the really hot or really cold trends for this holiday season. To my fellow online marketers, go forth and market to the masses. If you play your cards right it will be a merry Christmas indeed.