Volume Trumps Efficiency
Internet entrepreneur Fritz Demopoulos provided some refreshing perspective on ROI as the headline speaker at last night’s Web Wednesday in Hong Kong.
One key lesson? Volume is always more important than efficiency, which is often reflected in the price.
“ROI and volume have an inverse relationship to each other,” remarked Demopoulos, one of the co-founders of China travel portal Qunar, which sold a majority stake for around US$300 million to search giant Baidu two years ago.
“It’s the same for demand generation, as it is for sales,” he added.
“Some channels are super-efficient, and we have hundreds of them. Unfortunately, some of the pricier channels that provide the volume are technically not the most efficient.”
Baidu for example, which continues to dominate China’s search scene, is far from cheap despite its scale.
“The more you spend, you get more traffic - but it’s going to be costly.”
When search beats social
Leading social platforms also provide mass audiences, but conversion rates are lower, reducing their appeal to performance marketers.
The purchase signal remains much clearer via search.
“If you want to fly from A to B, from Shanghai to Beijing, having that intent from search is so much more valuable,” Demopoulos explained.
“Hence the prices are through the roof, because all the inefficiencies [in Baidu’s marketplace] are squeezed out.”
The full interview, covering the future as well as the past of online commerce, will be posted online (here https://soundcloud.com/webweds/sets/web-wednesday-hong-kong) around a week from now. It’s well worth a listen.
Online China - a decade ago
Founded in 2004 with partners Douglas Khoo and Chenchao Zhuang, Qunar was built entirely on performance marketing, at a time when unmeasured brand spend was the norm for the travel sector in China.
The strategy was partly guided by limited budgets at launch, but the decision was fortuitous, helping Qunar’s principals quickly learn what works without spending too much, while sidestepping fierce market competition.
This gave the site an invaluable headstart in a country where large incumbents tend to clone rather than acquire successful new entrants.
Celebrated for his ability to not only build but sell internet start-ups in China, Demopoulos continues to scout for early-stage online opportunities, in growth markets in Southeast Asia as well as Greater China, via his own private equity firm Queen’s Road Capital.
Companies like airlines and hotels are especially interested in sheer numbers, because they have seats or rooms to fill.
While generally dismissive of brand-marketing for performance marketers online, Demopoulos still believes interesting opportunities could emerge in social, especially as larger networks roll out improved analytics platforms.
“Search is so over-exploited, you’re never going to make any money just on search alone,” Demopoulos told the assembled Web Wednesday crowd.
“You have to think about the new frontiers," he said.
"Social is a frontier that gets a lot of attention but it’s been under-exploited, because no-one’s made it work yet.”
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