How to Save Marketing Money by Being Nice

By | January 12th, 2015

Raining Money on Google

We have tried a myriad of ways to promote the Backblaze online backup service. While most people sign up ‘organically’ – through a suggestion from a friend or after reading an article, we do spend many thousands of dollars monthly on Google Adwords alone. For years we have tweaked ad copy, keywords, targeting and more to optimize our ad spend. This month I decided to try something different: being nice. And guess what, it worked.

The Two Types of AdWords

While there are an infinite number of ways to look at ads in Adwords, there is one critical division: Unbranded versus Branded.

Unbranded AdWords Keywords

Unbranded ads are what most people think of when they imagine advertising on Google. Search for “sports car” and you’ll see:

Search for sports car

The first two items are ads from Jaguar and Mazda hoping to interest you in one of their sports cars. (The third item is the first ‘organic’ result which is not a paid ad.) These ads target people who have potentially never heard of the Jaguar F-Type and didn’t know that Mazda sells convertible sports cars; these companies want to introduce what they offer to new people.

Branded AdWords Keywords

Branded ads on the other hand are ones which target people searching for a specific company’s product. In this example, I would search for “Jaguar F-Type”:

Search for Jaguar

Since I know I am looking for this particular car, all the ads are offering me exactly this car (as is the first organic listing.) The 2nd and 3rd ads are regional car dealerships promoting particular offers to get me to buy from them. However, you’ll notice that the 1st ad is from Jaguar promoting this car.

Why would Jaguar spend money advertising this car to me when I have already shown explicitly that I’m interested in this car and already know that? Because there have been many studies to show that people often click on the ads even if the first organic result is exactly what they are looking for.

Backblaze does this as as well. Search for “Backblaze” and you’ll see:

Search for Backblaze

Even though you already know Backblaze, and typed in a search specifically looking for Backblaze, and the first organic result is the Backblaze home page…we still pay Google to have an ad show as the first result.

The Arms Race

Of course, since potential customers looking to backup their computers are searching for “Backblaze”, other companies see this as an opportunity to advertise to them as well. Since the Backblaze website is incredibly relevant to the search “Backblaze”, our cost to advertise to people searching for us is quite low per click. But when other companies start advertising for the term “Backblaze”, our costs start to increase as Google’s algorithms see a bidding war.

Over the last few months, two other online backup companies started advertising for our branded keywords, increasing the times their ads show up from approximately 0% of the time to 75%+ of searches.

Seeing this my initial reaction was: “If they’re going to advertise for our terms, we’ll advertise for theirs. Our product is good. Our conversion rates are good. Our retention rates are good. We’ll crush them!”

But…if we do this, what will actually happen?

They’ll spend a bunch of money bidding up our keywords and stealing some of our customers.
We’ll spend a bunch of money bidding up their keywords and stealing some of their customers.

All of us will end up paying Google a lot of money, but end up with the same net number of customers.

De-Escalation Of Brand Keyword Wars

Instead, I tried a different approach and sent the email below to the other companies.


Hey, I noticed you’ve recently started advertising under our branded terms.
I would like to request that you stop.

As you probably know, 90% of computer users don’t use online backup services. As such, your company, Backblaze, and the other online backup companies have a huge opportunity in signing up new customers. By advertising under our branded terms, you are instead chasing the much smaller opportunity of trying to steal customers who are already planning to sign up for Backblaze.

If you continue to advertise under our branded terms, obviously we’ll need to start advertising under yours. In the process you’ll take some of our customers and we’ll take some of yours. The net effect for both of us will be approximately zero…but we’ll both end up paying Google in the process.

So, how about you sign up your customers and the 90% who aren’t doing anything. We’ll sign up our customers and the 90% who aren’t doing anything. And we’ll let Google make money off other companies.

Yes?

Thanks,

Gleb


Two days later I received the following reply:


I would like to thank you for your candid and common-sense approach. As you rightly pointed out in your email, the net effect of bidding on each other’s branded keywords is zero. After inquiry, we have advised the business to cease bidding on Backblaze branded terms and received confirmation of the same as of approximately 7:30pm EST on Thursday, December 4. While we are competitors, we appreciate the open dialogue you started which provided a swift resolution in both our interests. Thank you.


Being Nice

We work hard to build a great product, a great experience, and a great company; and we work doggedly to let people know we exist so they don’t lose data. Being aggressive in business and marketing is critical to grow a business. But sometimes it’s more effective to take a step a back and realize not everything is zero-sum.

Have you ever had the opportunity to do better by simply being nice?

 

Gleb Budman
Co-founder and CEO of Backblaze. Founded three prior companies. He has been a speaker at GigaOm Structure, Ignite: Lean Startup, FailCon, CloudCon; profiled by Inc. and Forbes; a mentor for Teens in Tech; and holds 5 patents on security.

Follow Gleb on: Twitter / LinkedIn / Google+
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  • Revenco Andrei

    I have tried this technique – but it not always work. Sometimes i am getting low quality score which can harm my cost :(

  • Darren McBride

    When I google “back blaze” with a separation I see one of your competitors still buying an ad.

  • hackerDoc

    Great approach! Anti-trust generally applies to saturated markets. In this case, 90% of the market is untapped.

  • mazid umar

    Hello,

    I just want to say that I love what you’ve shared because it’s an amazing way to
    make money and promote my blog!

    Keep up your great work!

    http://www.talk4tech.com

  • Josh Levine

    Yikes – I am pretty sure that is illegal! Smacks of collusion, which according to Wikipedia.. “is an agreement among firms or individuals to divide a market, set prices, limit production or limit opportunities.” Don’t get me wrong, I completely agree with your intentions and think that antitrust laws are absurd (especially in their selective enforcement), but you still need to worry about them because all it takes is one prosecutor looking for a press release to ruin your business and your life.

    • Josh, we thought about that, but none of the collusion laws state that “companies are forced to pay Google for advertising”. Likely, all the companies are still paying for the same amount of advertising, we’re just not wasting it by bidding on each other’s key words.

      • Josh Levine

        First let me again repeat: I love BackBlaze, I love your
        blog, and I think what you did is rational and moral and good. I am no fan of
        anti-trust regulations. My goal here really is to show they how scary they are
        by pointing how easy it is to run afoul of them when making normal good business
        decisions. To quote from the
        FTC website

        “Market Division or Customer
        Allocation: Plain agreements among competitors to divide sales territories or
        assign customers are almost always illegal. These arrangements are essentially
        agreements not to compete: “I won’t sell in your market if you don’t sell
        in mine.” The FTC uncovered such an agreement when two
        chemical companies agreed that one would not sell in North America if the
        other would not sell in Japan. Illegal market sharing may involve allocating a
        specific percentage of available business to each producer, dividing sales
        territories on a geographic basis, or assigning certain customers to each
        seller.”

        I am not a lawyer, but your
        agreement to divide customers based on their search terms seems be a direct case
        of customer allocation and therefore anti-competitive.

        • Yea it’s interesting how those laws can be interpreted. In our minds for example, we still compete in the same areas and no customers are getting divided, as we’re still advertising against each other and in the same marketplace (Google). It definitely is an interesting set of laws, since we’re still openly competing on that platform. It’s more like saying, Ford can’t sell the Camaro under the Ford banner, and vice-versa with the Mustang.

          • josh

            Unfortunately, it does not matter how you (or a rational person) interprets the law, it matters if a staff member at the agency thinks you would be a good target. They literally have “Theory of Wrongdoing” meetings where they brainstorm to try to come up with a to creatively apply the law to make what you did be wrong. Once they do, you really can not win. They have all the resources of the federal government behind them, so they will fight until you give up. It can really ruin your day. Anyway, I don’t want to be too much of a bummer, just want to give a friendly word of warning to anyone reading this article to maybe consult a lawyer before emulating.

        • Milk Manson

          selling and advertising are two different things, are they not?

  • It is old business law: it pays to live well with your competitors.
    Two restaurants next to each other won’t necessarily steal each other
    customers: they will rather atract more visitors in the area.

    And you never know when anyone of you will need some little help from each other.

    (You could even think of sharing some experience) :-)

    Keep up being nice and cheap! :-) Thank you!

  • Guest

    It is old business law: it pays to live well with your competitors. Two restaurants next to each other won’t necessarily steal each other customers: they will rather atract more visitors in the area.

    And you never know

  • madara

    nice

  • That is incredible and I love the reply you got as well. Nice job!