Niel Robertson is Founder and CEO of Trada, a PPC marketing campaign marketplace.
AdExchanger.com: What problem is Trada solving?
NR: Fundamentally, the problem that Trada is solving is that paid search has become a complex and time-consuming task to do well. For small- and medium-sized businesses (spending between $1,000 and $50,000/mo on paid search) this is more challenging, as they lack the expertise to constantly optimize their paid search campaigns. Companies doing paid search must grapple with thousands of keywords, hundreds of ads, constantly changing bid prices, organization of their campaign to maximize Google Quality Score, which ad networks to run on (and the fact they will all cost different prices for the same keywords), tracking, CPA calculations, etc.
Trada solves this problem not with technology but with the biggest gap: expertise. And rather than trying to match one PPC expert to a campaign, we create a marketplace and collaborative system where multiple PPC experts (the average is 25) work on a campaign together. The benefit of this is both the diversity of thinking of these experts as well as their constant optimization.
How defensible is your model? Could it easily be replicated?
We have patented many aspects of our marketplace (including future types of advertising we will go into). When we started we thought we could whip the system together in a few months. As it turns out it’s much more complicated to get tens of people to work together on a paid search campaign well and to manage the quality of the crowd. One of the problems in paid search is that there is no common definition of expertise. Different campaigns require different strategies. This is a constant process of development, analysis and refinement. We did not launch the company for 18 months (even though we built our first version of the market in 2 months) because we wanted to wait until we had a maturity level around all of these things that we thought was conducive to the best outcomes possible for any advertiser we encountered.
Can you provide a use case of a typical campaign?
We have many different campaigns from software lead generation to retail to auto dealerships. A typical campaign for Trada spends between 3,000 and 15,000 a month (we have a few smaller and larger campaigns as well). A great use case is a niche retail site, say a company selling satellite radios and parts online. They are very focused on the cost per sale (also known as CPA) from paid search. To build an effective campaign for this type of customer you need to use lots of long-tail keywords (more specific terms that might include brands or product part numbers) instead of general terms ( e.g. satellite radios). In addition, many of the ads need to be created specific to each product or SKU, and the ads need to be linked to the part of the website related to the product. This is incredibly time consuming to do as an individual. Splitting up the work between 25 people makes this much more palatable. An average campaign in Trada has 6,500 keywords, 25 experts working on it and more than 110 ads. Some campaigns have up to 40,000 keywords and more than 50 optimizers. It can depend on the complexity of the site (how many products they sell) and the budget they have allocated for paid search. A typical customer like this sees increased volume of sales and decreased CPA costs due to the cheaper, long-tail keywords our optimizers use.
What trends are you seeing among your clients? Any momentum with agencies using your product?
We are seeing larger budgets come into the system since our launch. Some of this is purely due to the word-of-mouth about Trada’s new approach to paid search. Some of this is due to advertisers simply spending too much time or too much money and not getting results. They recognize they have to do paid search but have not had many alternatives until Trada.
As for agencies, we’ve seen great interest from them. An agency can be anything from two freelancers working together up to the top 10 agencies. In both cases, they struggle with the same challenges of paid search: it’s time consuming to do well. When you have limited resources and many customers to serve this can be a challenge in PPC. There is great commoditization going on with PPC services and agency margins for this work are being squeezed (as opposed to something like SEO work which has much higher margins). Trada allows these agencies to sit in the control seat with their customers but leverage Trada’s marketplace of experts to build comprehensive campaigns. The agency effectively becomes the manager and not the doer. which our feedback shows they like.
How does the revenue model work for Trada and the search marketer participants?
Advertisers pay Trada a fixed price per click and/or a fixed price per sale (or lead or registration). In the price-per-click model, this sets the maximum price an optimizer working on their campaign can bid on keywords. The optimizer is incented to find keywords that work for less than that price, and they receive the difference. The advertiser can specify multiple “tiers” of prices if they want to allow more expensive keywords to be bid on, and they can reduce the payment in each tier to not create greater incentive to bid on expensive keywords. In the price-per-sale model, an advertiser tells Trada what an acceptable cost is per sale. The optimizer (PPC expert) is then tasked with spending less than that amount on paid search spend (clicks), keeping whatever is remaining after the sale. If an advertiser specifies $10 as their acceptable cost and an optimizer spends $8.50 on clicks to get the sale by good optimization, they make the remaining $1.50. Trada, in all cases, takes 25% of the payment to the optimizer. This fundamentally creates a model where everyone in the market is working on a pay-for-performance system. As a last note, advertisers are not locked into their price. As they get more data from clicks and sales they can lower their price, add a new tier or even increase their price to get more volume. In the end, we have created a market effective for everyone.
Given the advertiser's ability to change CPA or CPC goals, for example, why isn't this a race to the bottom in terms of pricing?
Paid search is a constant trade off of cost and volume. Independent of how you do paid search (through Trada or otherwise) you simply can’t keep reducing your CPA to 0 as at some point you’ll simply get no clicks and thus no sales. The price you pay for a keyword is directly correlated to the position you get on Google or Yahoo’s ad strip. The higher the price, the higher the position. If you keep reducing your price in Trada, you’ll limit the positions your optimizers can obtain for their keywords, and thus the volume of clicks and conversions you get. We find in Trada that advertisers have not raced to the bottom primarily for this reason. Also – there is an implicit need for the optimizers to have some margin to work with. If the margin is taken away, their incentive is gone. In the end, advertisers understand that getting an average CPC of 50 cents on Trada and giving up a few cents per click to the optimizer makes much more sense than doing it themselves and getting a $2 CPC by paying Google directly with no margin.
What feedback are you getting from search marketers who are enabling your marketplace? Can they make a living from just Trada?
The number one comment we get is from freelancers who spend a lot of their time finding and managing clients and not being able to focus on the actual activity of paid search. Trada has already found the clients, handles the reporting and support, and they get to just focus on paid search, which is what they like to do. I think this will be a big growth segment for us. Right now, we have top optimizers making in the low $1,000’s a month, but as the market grows and our software becomes more sophisticated we expect this number to scale quickly. I expect by the end of the year, we’ll have a number of optimizers who make a full-time living comparable to their previous salaries by only working in Trada.
Is it possible to port Trada's marketplace model to online display advertising (or other channels)? What might be the challenges here?
Many of our direct advertisers and agencies frequently ask us this. We have found there is a commonality between all forms of performance-based marketing online: complexity, scale and the need for constant price optimization. In paid search, the complexity comes from the thousands or tens of thousands of keywords that can be used and the process of matching ads to them, bidding correctly and optimizing against results (like conversion rates). In display, mobile and content, the complexity comes in another form: placements. To get the most out of a Google AdSense campaign, experts need to hand manage placements (domains or URLs they want their ads to appear on) and the right price for each placement. Fundamentally, we believe our business can extend into other forms of advertising (not to mention other paid search networks beyond the big 3). We’re very focused right now on building the best platform for collaboration, reporting and incentive systems for experts. We think this is the right strategy now to enable us to successfully expand the business when we want.
Discuss your financing to date and whether you anticipate future needs around funding.
We have raised a total of $2.2 million to date. We have raised this in two rounds and from one venture capitalist firm, Foundry Group, and some very relevant angel investors: Stuart Larkins and Jamie Crouthamel (Performics), Dan Murray (super affiliate), Alan Warms (ex GM of Yahoo! News), Carlos Cashman (CourseAdvisor.com) and Robert Wolfe (Moosejaw.com). We have stayed extremely frugal and focused the business on self-sustainability. We’re getting closer to that by the day. We may choose to accelerate into the curve or grow organically – that decision has not been made yet. Our existing investors have committed to any future funding needs we may have, so we can delay that decision for a while.
How scalable and manual is the Trada marketplace model? How many employees is your company today - and if you were to grow significantly, would you need to add a lot of headcount?
The beauty of market models is once you have the model down (and a lot of the plumbing to automate it and make it self-managing) you can scale the business incredibly. eBay and Match.com are good examples of these types of companies. We’re starting to see the benefits of that already. We have a small team (<20 people) but expect to grow quite a bit. The growth will be primarily from revenue-generating head count such as telesales and business development resources. We can speed up or slow down depending on the growth we’re seeing.
A year from now, what milestones would you like to see Trada have achieved?
On the feature front, I want us to have refined our marketplace to a maturity that a true PPC expert can quickly come to Trada, find a campaign to work on, and be successful. Meaning that they can recreate their previous successes easily, and we provide them the tools to do so. On the advertiser side, we want to continuously deliver on our credo – Ridiculously Easy. Measurably Better. Powered By People. With a broad set of advertisers, optimizers and agencies, we never have a lack of items to be better at to accomplish this goal. In terms of the market, I want Trada to be a sizable marketplace for all participants. Advertisers should have a diversity and scale of PPC experts that allow them to get attention from a large set of relevant optimizers. Conversely, optimizers should have enough advertisers to select from, so they can make a living off of Trada. We’ve got good scale today already, but I’d love to see us get to an order of magnitude more on both sides (which is about the pace we’re growing at). From a public perception perspective, I want Trada and our model to be respected as the single best way to build a paid search campaign if you simply can’t afford to spend the time or money doing it yourself. If we even get half of that right then I think we will have had an amazing year!