Monday, December 14, 2009

The Next Big Thing - Network Intelligence

Last week I read and listened to two stories that when combined painted an interesting vision of the future. One story shared the results of a contest sponsored by DARPA in which participating teams were to find 10 red weather balloons released at various locations across the United States. The second story was that of Google launching personalized search.

The winning team in the DARPA contest was a group from MIT who used social networking and a multi-tiered affiliate rewards structure to provide a financial incentive that aligned the interests of the team in pursuit of a common goal. In listening to the story on NPR's Science Friday, I recognized the power of leveraging a social network to refine information and create consensus around points of knowledge. I also thought of why multi-level marketing (MLM) compensation plans are so effective at building a channel. Participants were rewarded for recruiting members who were ultimately responsible for providing information that led to the successful location of the 10 weather balloons, so people were rewarded for quality and results rather than on participation alone.

After stripping away the financial incentive, the large social network created to find the 10 weather balloons was a use case of something that has been happening for years on a smaller scale online. Message boards and social encyclopedias are built and ultimately succeed as communities of interest gather around specific topics. The difference here was that the network was not a casual "ad hoc" network created to by a group of individuals trying to create the best encyclopedic entry on a topic of common interest or to share specific knowledge through altruism. The network MIT created to win the DARPA challenge was designed to achieve a specific goal, in part by providing a proper incentive.

The end result was what I am calling Network Intelligence, the aggregate intelligence of everyone in a network that surpasses the intelligence of any individual for the defined purpose of the network.

This is not so different from institutional knowledge; however, the concept of institutional knowledge tends to be historical rather than actionable. You could think of Network Intelligence as that portion of institutional knowledge that is transactional or relevant to a specific purpose that is being acted upon in the present.

Network Intelligence is also what will be taking Google's search to the next level once personalized search becomes "networked."

I was consulting with a friend on Thursday, and he was excited to show me how many pages on his sites had reached the #1 position for various keywords. I then remembered reading about Google's personalized search a week before. We went through his keyword searches on Google using our own computers and found we both received different Google result pages for the same searches. Prior to our meeting, my friend had spent most of his time reviewing his own sites and tracking internal changes over time. I hadn't spent much time visiting his sites in the past. Most of my searching using his industry keywords had been to conduct market research and sign up for offers from other companies.

Where he was seeing his sites and pages in the #1 position for very competitive keywords, I was seeing the same pages in the #3, #4, or #5 position. So our respective search results were indeed personalized based on what we had been searching and clicking on previously within the results page.

(I'm not going to go into all of the SEO and relevancy implications here, but there are now questions to be answered related to how new sites and pages are going to compete under this new methodology . . . at least until network intelligence is applied.)

BUT, what would happen if I had the option to have my friends' preferences and search habits influence mine? If, for instance, I had wanted to follow the same biases of my friend, who is an expert in his industry, could I have seen the results presented in the same order as his appeared?

In order to do this, Google, Facebook, or another aggregator of personalized information would need to create an algorithm to have the search results and preferences of friends influence the results of each other.

Another feature I want to have is to follow the search preferences of specific individuals who have opted in to allow their preferences to be followed. I could then (with the permission of my friends) see which search results were most relevant to them in specific areas. There are huge privacy implications here, but I think the service would work incredibly well as long as specific search terms for which my friends were searching weren't shared . . . or maybe it would be even better if they were.

I would love to know what my friends were searching for online. Oh, the implications on privacy and individual behavior! How would this impact a friend who becomes embarrassed because he is searching for nefarious content? How could this be leveraged for competitive research and corporate espionage? Allowing transparency and the sharing of search habits might change the behavior of those whose public values and private behavior is inconsistent because of positive social influence. Is that so bad? I think that could create one of the biggest safeguards against the viewing of illegal content and pornography. Would people be viewing it if they had opted into a service that let others know exactly what they had been searching for?

But I digress. The first implementation would simply be applying an algorithm to my search results based on the aggregation of my social network. I would refer to this as "social intelligence," but that concept has already been used by Daniel Goleman and others, who have spent the last 15 years defining different modes of intelligence. Network intelligence has already been used by computer scientists, such as Drew Major and others, to explain where "intelligence" resides in a network to manage request routing, caching, and other network concepts. But I think the concept of harnessing the intelligence of a social network (whether formal or informal) deserves the title of Network Intelligence.

The real-time internet, such as watching trending items on Twitter, provides some network intelligence, but the network is too broad to be useful for a specific purpose beyond identifying topics of interest. The REAL value of Network Intelligence is in the network itself--surrounding yourself with the most intelligent and thoughtful people on a broad array of topics to provide you with the most intelligent and insightful information on any subject of interest.

Now, here's the interesting point: How will network intelligence influence the evolution of social networks over time? What will happen to the relevancy of pluralism, multiculturalism, and the value of differing opinions and diverging theories? Won't someone just surround him or herself with like-minded people? Not if the intelligence isn't helpful over time.

Those who provide "bad intelligence" will over time become less relevant as the wisdom of the masses is refined through collisions with new thoughts and ultimately hardened through agreement. Network Intelligence is not static but a concept full of movement and change through "living" knowledge and wisdom. The network accommodates and assimilates new information that it finds useful and "loses" less meaningful information over time.

In the end, I believe the concept of network intelligence will drive us to the pinnacle of human intelligence that can be found through the reasoning of humankind. While I believe there is a higher source of knowledge that a human social network, I don't believe there is anything more powerful that can be created through the integration of human behavior and technology.

Wednesday, December 2, 2009

Black Hat Marketing Techniques Exposed and Why to Avoid Them

Exposing Black Hat Marketing Techniques

Well, I said nearly a week ago that I would put this post online. This post has implications that go far beyond online marketing and economics into the realms of politics, ethics, and even religion. I'll leave it to the reader to make those connections and associated implications for him or herself.

There is a principle I've found to be valuable throughout my career called "work." I remember sitting in a physics class at Butler Middle School when Mr. Browning said, "you can't cheat work." As a principle of physics, he was absolutely right. And the principle also applies to online marketing and life in general. If you want to succeed in the long run, you have to work for results and to build long-term value.

Yes, you can innovate and find seems and creases to exploit and make money through improved efficiencies. That's a great guerrilla marketing strategy I have employed when creating search-term optimized awards programs, niche interest pages, and directories of user-generated content. But those projects all had something in common--they provided added value to the economic system. Partners, customers, and search engines loved these programs for improving relevancy and access to valuable content.

Most black hat marketing strategies drive results through unfair or unethical practices by ultimately attempting to cheat work. And what most of these approaches share in common is that they are only effective for a short time before they are exposed or lose their effectiveness (requiring just as much or more actual work than legitimate marketing methods).

Here are a few examples of black hat marketing to consider:

The Bump

A bump is an offer added to the end of a lead or CPA offer to essentially get people who have just signed up for something to (usually unwittingly) sign up for a second or third offer as well. When implemented, the bump offer usually appears as a required step in completing the initial registration process. Typically, this offer is pre-selected on the first confirmation page with "hidden" billing terms. In essence, the customer is now being billed for two different offers by completing one. Credit card information entered for the first offer is usually shared with the owner of the second offer as well, so the user doesn't have to go through more than one registration process (or see that they are actually going to be billed for subsequent offers).

I think was the first company I saw effectively employ a bump offer when signing up for a free site membership. Upon completion of the registration, the site made it appear that you needed to complete a credit card application to before the process was completed. This offer was presented as a way to receive access to their premium services or to receive a $15 credit. They implemented this offer back in 1999, so the details have become fuzzy in my mind. I just remember being mad when I clicked through and saw what they wanted me to do. This old bump offer, however, wasn't nearly as slick as current bump offers. You still had to complete a second form rather than being opted in automatically to participate in the offer.

Shared Billing

This is very similar to a bump but comes in a few different forms. Many offers I've seen recently promote free access to a premium service. The catch? To receive the free premium service, you must sign up for one or more partner offer. Similar to the bump, you are often caught in a seemingly never ending cycle of registrations to get what you thought was a straightforward offer. Those who are most effective include a page where you can sign up for multiple offers and then enter your billing information once for all of the offers.

This practice of sharing credit card information across vendors is dangerous. It also tricks the consumer who is just trying to get a free offer into paying for service he or she doesn't want or need through a confusing registration process.

You can read about one such program, run by Affinion, that was recently exposed and featured on Good Morning America among other media outlets: Co-registration probe. Evidently, companies including 1-800-Flowers, Orbitz, Shutterfly, VistaPrint, and more than a dozen other companies made more than $10 Million from this program. is included in the $10 Million circle. Dozens of other companies earned more than $1 Million from the program.

Advertising and Referral Arbitrage

This is a rather simple and unsophisticated tactic that employs PPC advertising and SEO pages to generate incremental advertising revenue from Google AdSense and other advertising networks. The tactic usually consists of creating SERP (Search Engine Results Page) spam pages tied to specific keyword where advertisers are paying a high cost per click. The trick is to then get traffic to these pages that have little value in themselves and then get people to click on the ads.

You've probably visited dozens of these sites. Most make little sense or are simply directories of keyword categories with advertisements. What's wrong this this tactic? The "marketer" is not adding any value and is actually frustrating the customer who is looking for legitimate, valuable content. The advertisers also lose because their ads are getting additional clicks from customers who are tricked into clicking on ads rather than actual product links.

In the past, I have literally clicked through up to a half-dozen lead referral and directory sites before getting to a page where I could actually purchase the product I had search for in the first place. Far from adding value or efficiency, the companies that run these sites are simply inserting themselves as "value sucking" intermediaries.

Cookie Stuffing and Other Affiliate Fraud

You're on a site looking for a new phone service because you're not happy with the one you have. You find a site that lists six competitive services. You click on one to check it out. The site you are on is an affiliated site of the six services you are comparing. They have signed up to receive a commission from each of the six competing phone companies any time someone they have referred makes a purchase. But they want to be sure they get credit for making the sale . . . whether or not they actually do. So instead of setting a single cookie that tracks the affiliate click to a single company, they run a script that sets cookies for ALL SIX COMPANIES before handing the customer over through the first link. They may also set a few cookies for phone conferencing or other phone-related products as well just for good measure.

What's more? The site is most likely masquerading as a review site, so you believe you are getting an impartial review of the products in question. In this case, all of the products probably sound great, but the service that provides the best commission probably sounds just a little bit better.

Promoting Products and Services with Little or No Value

Take a look at the affiliate offers on when you have a little time or want a good laugh. Many of the offers are nothing more than publishing free online content as eBooks or aggregating and selling videos from YouTube as a "video tutorial series." These companies make sure they charge enough for these "products" that they are able to enlist greedy or gullible marketers to push their offers. Is an eBook on how to assemble your own windmill really worth $700? Even when those instructions are found on the Internet for free?

Carefully research any product or service you promote, so you aren't unwittingly associated with a scam or even a horrible product. Chances are, those who sell such deceptive and valueless goods will not survive long enough financially to get around to paying you for your marketing services.

How Black Hat Marketing Poisons the Well

So, what's the big deal?

There are three main reasons to avoid black hat marketing: 1. personal or corporate integrity, 2. buying into a fraudulent ecosystem, and 3. sacrificing long-term success for short-term fixes.

Personal or Corporate Integrity

Do you really want to be associated with any of these tactics? I hope not. I was talking with someone last week who participates in advertising arbitrage. A comment he made when I explained that he should add valuable, unique content to the optimized pages he had created was, "that sounds like work." I can't think of any better personal indictment or clear sign of a lack of integrity than the stated desire to get something for nothing. Someone I admire recently shared something his father had taught him: "any deal that is too good is stealing." He was evidently arguing for the principle of fair value exchange, someone fewer and fewer people seem to embrace.

Buying into a Fraudulent Ecosystem

I've ranted a few times about this point already, so I'll be brief here. Once you engage in black hat marketing practices, you are damaging the economic engine for the industry that is paying your bills. You are also swimming with sharks and shysters who are also trying to do the same thing. The borderline between what is ethical and what is legal can quickly become blurred, and you may find you have been treading on the wrong side of that line.

Another risk is that all of the revenue you are "earning" may never actually make it into your bank account. Why? Merchant accounts in shady industries are often frozen or suspended, marketing partners may not pay in a timely manner, and many companies that sell products or services that are "too good to be true" will fail financially or be shut down. This is an ecosystem in which you can't afford to participate, even as a little fish.

Sacrificing Long-Term Success for Short-Term Fixes

Yes, any company can get drunk off of their own bad revenue. Such a drunken stupor nearly always results in bad decisions that stifle the long-term success of the company.

I am aware of a company that was making money on ads that promoted trivia quizzes, IQ tests and that like that found it very difficult to ween themselves from the revenue these ads provided. What seemed like innocent ads were actually powerful and deceptive tactics to get people to sign up for paid services to receive the results of their quizzes. Wouldn't you want to give your cell phone number to receive your IQ results if you just spent the last 20 minutes completing the evaluation? Evidently, lots of people wanted the results of their quizzes. The fact that they were signing up for a monthly recurring bill was hidden in the small print.

They were so successful with their offer that they were willing to pay an $8 CPM (Cost Per Thousand impressions) to any website publisher who would run the ads. But it didn't last. After some time, they decided (probably with help from the FTC or FCC) that they needed to make the terms of service in the small print more obvious. This reduced their conversion rate and the rate they were willing to pay for CPM advertising. They were probably still getting tons of complaints and credit card chargebacks because they soon added a phone text verification to the process. This again drove down the conversion rate and CPM they were willing to pay.

Meanwhile, the website publishers who were making money on these offers were reluctant to shuck the ads from their sites, even after receiving angry complaints from site visitors. Why? Because they had gotten drunk off the revenue and didn't have a good revenue replacement. And the downward spiral continued. The publishers with foresight focused on improving their services to get more qualified visitors and expand their advertising inventory. Those that reacted poorly focused on increasing the number of ads units on their sites and on other short-term strategies to temporarily prop up revenue that had been too good to be real and sustainable.

In another instance, I worked with someone who was promoting his product through a bump offer. In the end, he had so many credit card chargebacks (for what could have been successfully marketed through legitimate methods) that the merchant account provider assessed him with a huge fine and canceled his account with more than $20,000 in frozen funds. After several months it appears he will be able to collect most of the money that was frozen in his account, but the cost of the lost cash flow was tremendous. In the end, the decision was made to shut down the site rather than open a new merchant account and start over.


After reviewing the tactics listed here and several others, I am still of the opinion that there is no free lunch when it comes to internet marketing. I don't believe people who engage in these practices will ever enjoy long-term success. Instead, they will continue to hurt consumers and the economy at large as they exploit their next opportunity and execute their next scheme. They merely understand how to combine technology with the art of deception to line their own pockets at the expense of customers and the very companies they promote. They engage in changing the dynamics in a zero-sum game, where if they succeed everyone loses.