By Sarah Lacy
Dave Deasy had spent much of his business life at big tech concerns like Hewlett Packard (HPQ ) and Time Warner's (TWX ) America Online division. So when he set out to build his own e-commerce outfit he had the Web and business savvy -- but brand building was something new. "You always hear it's hard to build a brand and build traffic for a new site, but you don't really realize how hard it is until you're trying to do it from scratch yourself," he says.
Even for a young retailer like Deasy's MyFavoriteCity.com, which sells city-themed gift baskets, the holiday season can make or break the entire year. Revenue between Thanksgiving and Christmas can equal that of the previous four months, if done right, Deasy says. If not, you've missed your shot.
This year, more resources than ever are available to Deasy and other Web entrepreneurs. Outfits like Yahoo! (YHOO ), eBay (EBAY ), and Google (GOOG ) are courting small businesses, offering tools and know-how that can help them design a Web site in 30 minutes, process and track orders, control inventories, and advertise to the right audience cheaply.
These companies aren't just being nice -- mom-and-pop shops eager to reach a national audience have brought them big revenues, and they want to keep startups coming back.
Such revenue numbers aren't broken out separately, but eBay has several hundred thousand small outfits selling through its site. Yahoo's small-business division is a profit center for the portal, selling Web hosting, antifraud tools, and the like for recurring monthly subscriptions. And a big force behind the success of Google's "pay-per-click" model is the hundreds of thousands of small businesses who finally have a manageable, cost-effective way to advertise nationally.
Recognizing their own clout, smart small businesses are using it to their advantage. Ray Allen, CEO of Williston (Vt.) seed seller AmericanMeadows.com, knows his Google customer-service rep, Michelle, by name and calls her whenever he has a question. "She's my buddy," he says. "I send her wildflower seeds." Allen is not exactly a marquee customer -- at most he only spends $100,000 per year advertising, a drop in the bucket of Google's $2.6 billion annual revenues -- but his loyalty is what major providers are counting on. They've found that once small businesses find a partner they like, they tend to stick with it.
Such tools -- and attention -- weren't available to Web startups five years ago, and even three years ago, they still weren't very good, Deasy says. But using such resources, he has stayed in the black, generating $500,000 in revenue his first year, and plans to up that to $1 million next year. "I probably still could have made it this far, but it would have been much harder and taken much longer [without online tools]," he says.
Naturally, other small businesses have the same basic tools at their disposal, so a lower barrier of entry has also made for more competition. Standing out requires legwork, and your advantage might just be that you're the retailer willing to do it.
You can explore some free ways to boost holiday sales. Your standing on regular, unpaid search results can be enhanced by making sure key search words are on your site. For example, you should hawk "flowers," not "floral arrangements," says Rich Riley vice-president and general manager of Yahoo Small Business. And it always helps to jazz up your site with some holiday-themed text, featuring gift ideas and free shipping, so that those seeking them don't have to look far. "Do that work for the shoppers," Riley says.
And there's good old fashioned PR, says Elisabeth Osmeloski, forums editor for Search Engine Watch, an online trade publication. You might consider sending a PTA Web site your list of top 10 teacher gifts, with links back to your store. Blogs, too, can provide cheap or free access to a passionate, albeit niche, audience.
That said, by far the biggest tool in the small-business owner's arsenal is paid search advertising, experts say. And while it's all but essential to be on Yahoo or Google or both, it's also a good idea to try some second-tier search sites, especially around the holidays, Osmeloski says. Examples include Shopping.com, Findwhat.com, and Looksmart.com. Here, even popular key words may go for just 5 or 10 cents per click.
"HALL OF SHAME".
Here's how it works: Search engines like Google and Overture, now owned by Yahoo, list natural search results -- but show paid or sponsored results next to them. Outfits bid to be listed when keywords are entered by the searcher, and the highest bidder generally gets the top listing. When users click on that ad, the business is charged whatever amount it agreed to.
Google and Yahoo like to say the process is simple. But doing it right takes time and, sometimes, costly trial and error. With prices of keywords rising, small businesses who aren't actively managing their accounts on a weekly basis likely aren't getting the same value they got a year or so ago.
Allen learned this in a little experiment. He bid on "gardening" on Overture, high enough to be the third ad listed when searchers entered the word. But he got so many clicks at such a high price, he spent $500 in two hours with no purchases to show for it. Since Allen's site only sells seeds, people could have entered "gardening" looking for spades, pots, or lawnmowers. He was paying top dollar for traffic that was way too broad. "It was just mass clicking," he says. "We call it dumb surf -- they just click on whatever comes up."
Terms like "gardening" are in what he calls his "hall of shame." "The proven losers are just as valuable to know as the ones that work," he says. "When it's your money, you learn fast."
Competition for keywords is fiercest around the holidays. Yahoo and Google both offer free tracking tools to show businesses how well each keyword is working, how many click-throughs are buying, and what other keywords may also draw traffic. Any changes can be made instantly, 24 hours a day.
Another tip: Mind your ad copy. With all the focus on ranking high, many small businesses neglect what their ads say. The holidays are the perfect time to rewrite, adding words like "last-minute shopping," "sale," and "free shipping." "You have to know your customers and think like them," says David Fischer, director of AdWords, Google's pay-per-click program.
All of this can take time. Allen has more than 20 keywords on both Yahoo and Google, and many more on smaller sites. And because getting the right word for the right price is such a delicate balance, he's loath to delegate the task to an employee. The constant tweaking may sound like a hassle for an already maxed out business owner during the hectic holiday season. But little things, it seems, have a way of adding up.
Lacy is a reporter for BusinessWeek Online in the Silicon Valley bureau