duminică, 29 septembrie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


More Government Shutdown Hype

Posted: 29 Sep 2013 03:31 PM PDT

The AP comments How budget showdowns could squeeze the US economy. The story is nearly all hype. Let's take a look.

Q. What exactly will happen within the next days and weeks?

A. The most urgent deadline is for Congress and the White House to agree to keep funding the government after the current budget year ends Monday. Otherwise, some of the government would have to shut down. The House and Senate are considering bills to fund the government past the deadline. But House Republicans want to cut off funding for President Barack Obama's health care law as a condition of passing the spending measure. Senate Democrats and the White House have balked. Unless one side essentially blinks, a partial shutdown of the government will occur.

Mish: That is accurate so far.

Q. What about the federal borrowing cap? First of all, what is it?

A. It's a legal limit on how much debt the government can pile up. The government accumulates debt two ways: It borrows money from investors by issuing Treasurys. And it borrows from itself, mostly from Social Security revenue.

Mish: It's important to note there is no social security fund whatsoever. Every penny and then some has been borrowed and spent. Here comes the hype.

Q. What if Congress can't agree to raise the cap in time?

A. It could be disastrous. No longer authorized to borrow, the government would have to pay its bills only out of the revenue it gets from taxes and fees. This would force the government to immediately slash spending by 32 percent, the Bipartisan Policy Center estimates. Most analysts think the government would delay paying each day's bills until it had accumulated enough money to pay them all.

Even worse, the government could miss interest payments on Treasurys, triggering a first-ever default by the U.S. government. U.S. Treasurys are held by banks, governments and individuals worldwide. Ultimately, a prolonged default could lead to a global financial crisis.

At the same time, Social Security and other benefit payments would be delayed. Government contractors might not be paid and would likely lay off workers. Paychecks for military personnel could be delayed.

The government actually reached its borrowing limit back in May. Since then, the Treasury has taken a variety of measures to avoid exceeding it. But the cash generated by those measures will run out sometime between Oct. 22 and Oct. 31, the nonpartisan Congressional Budget Office estimates.

The date isn't exact because it isn't possible to foresee precisely how much revenue the government will receive and when.

Mish: The following AP statement is preposterous "Most analysts think the government would delay paying each day's bills until it had accumulated enough money to pay them all."

I am not aware of any analysts who have stated the government would delay paying all bills until it could pay them all.

Moreover, the suggestion that "the government could miss interest payments on Treasurys, triggering a first-ever default by the U.S. government" is equally nonsensical. US treasuries would be the last thing that would go unpaid.

Q. Will the economy escape harm if both deadlines are met?

A. Probably. But even brinksmanship can have consequences. The last major fight over the borrowing cap, in the summer of 2011, wasn't resolved until hours before the deadline. Even though the deadline was met, Standard & Poor's issued the first-ever downgrade of long-term U.S. credit. That, in turn, led to a 635-point plunge in the Dow Jones industrial average the next day.

In August that year, consumer confidence plummeted to its lowest level since April 2009, when the economy was in recession. Spending at retail stores weakened.

"The fallout nearly caused the fragile economic recovery to stall," says Mark Zandi, chief economist at Moody's Analytics.

Mish: The report goes on and on blaming everything but hornet attacks on what happened in 2009. I call it's ridiculous speculation at best. And the hype continues ...

Q. All this sounds pretty scary. Why aren't financial markets panicking?

A. Stock prices have fallen in six of the past seven days, partly because of the looming deadlines. But the price declines have been modest. Many investors likely feel they have seen this movie before and know how it ends: with another last-minute deal.

"After several rounds of fiscal brinksmanship ... markets may be somewhat desensitized to the headlines," Alec Phillips, an economist at Goldman Sachs, wrote in a note to clients.

Mish: It's not scary at all, but the AP sure did its best to make it sound that way.

A partial shutdown would hardly be disastrous. In fact I welcome such a shutdown as noted in Government Shutdown is a Fantastic Idea.

Fantastic Idea

If you think that a government shutdown is a fantastic idea (I sure do), then please contact your elected representatives and let them know.

But don't expect anything to come of it. After all, the money will last until the end of October, and that is a long time in politics.

Of course, to keep the government running now, the treasury is already borrowing against Social Security funds that are already spent! That's how absurd the setup is. 

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Giant Deadly Hornets Kill Dozens In China; Venom Dissolves Flesh and they Can Spray It

Posted: 29 Sep 2013 11:22 AM PDT

I have received hundreds of emails regarding my post Attack of the "Digger Bees".

Many suggested getting an EpiPen® (epinephrine) Auto-Injector‎ for Liz and we will do that.

Many pointed out that "digger bees" are not bees but rather wasps. That is something I knew but did not mention in my post.

I responded to some individuals that I like bees, and even have a "humble bumble" home for bumblebees, and I put out nests for mason bees.

With that backdrop, some of you may be interested in Giant Deadly Hornets Kill Dozens And Injure Hundreds In China.
Deadly hornets have killed at least 28 people in China following a string of recent attacks that have injured hundreds.

A number of tragic cases have been reported, including a mother and son who died after being surrounded by a killer swarm.

A man who tried to help them suffered kidney failure after the giant hornets chased him for 200 metres and stung him repeatedly on the head and legs, The Mirror reported.

In the city of Ankang alone, 18 people have died from the stings, while a further 212 people have been injured health official Zhou Yuanhong told Associated Press.

Experts are blaming the vicious attacks on Asian giant hornets, which terrifyingly grow up to 5cm in length. The mammoth insects also wield a stinger in excess of 6mm long.

The natural predators have jaws powerful enough to chew through regular protective bee suits and their venom, which they can spray, dissolves human flesh.

If their venom lands in the eyes, the eye tissue will melt, according to a National Geographic documentary.
Japanese Hornet Documentary



The documentary is a lengthy 45 minutes, but some may find it interesting. Link if video above does not play: Japanese Hornet Documentary.

Those giant "hornets" look like giant yellow-jackets to me. But yellow-jackets and paper wasps look alike. About.Com explains differences in a report on Wasps, Yellowjackets, and Hornets.
The vast majority of bees and wasps in our world pose no threat to people. Most prefer to go about their business, parasitizing or preying on other insects. The social wasps of the family Vespidae, however, can be a downright nuisance. Vespid wasps include paper wasps, yellowjackets, and hornets, all of which will defend their homes vigorously should we disturb them. Worse yet, they have a tendency to build their homes in the places we like to spend our time, so there's a good chance you'll encounter them.

Paper wasps, yellowjackets, and hornets are all masters of papermaking. In spring, the queen constructs a new nest by gathering wood fibers and turning them into a papery pulp, from which she builds a home. Paper wasps build open, umbrella-shaped nests, often found suspended from eaves or window casings on the outside of your home. Hornets are famous for their massive, enclosed nests which can be seen hanging from tree branches or other sturdy perches. Yellowjackets also make enclosed nests, but theirs are found below ground. Care should be taken to check for yellowjacket nests before using string trimmers or lawn mowers.

All the paper wasps, yellowjackets, and hornets produce new colonies each year in temperate climates; only the mated queens survive the cold winter months, tucked away in sheltered places. The queen emerges in spring, chooses a nest site, and builds a small nest in which she lays the first eggs. Once the first generation of workers matures, these wasps will expand the nest for succeeding generations. In late summer or fall, the old queen dies, and a new one mates before her siblings die off. The old nest usually degrades over the winter.
Behavioral Differences Between Wasps, Yellowjackets, and Hornets



True Bees

The above table neglected bees.

Honeybees, bumblebees, and mason bees, etc., go after pollen. The things you see flying around at picnics, garbage cans, and especially sweets and sodas are yellow-jackets. They are an outright nuisance, and can be deadly.

As far as "dissolving flesh" goes, I can actually attest to that. On one hand I was stung three times and skin was gone in all three places. Other stings were simple swollen and itchy for over a week.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Seth's Blog : The secret of the five top

 

The secret of the five top

The person who invented the banquet table, the round table for ten, wasn’t doing it to please those at the banquet or even the banquet organizer. He did it because this is the perfect size for the kitchen and the servers. The table for ten is a platonic ideal of the intersection of the geometry of bread baskets, flower arrangements and salad dressing. Bigger and you couldn’t reach, smaller and there’s no room.

But, here’s the thing: the table for ten isolates everyone at it. You can’t talk to your left without ignoring your right, and you can’t talk across the table without yelling. And so, the very thing you’ve set up to engage the audience actually does the opposite. This is even true if you're taking nine people out for dinner--ten at a table undermines what you set out to do.

Worse, if you’re brave enough to have a speaker or a presentation at your banquet, you’ve totally undermined your goals. Half the audience is looking in the wrong direction, and there are huge circles of empty white space that no microphone can overcome.

In my experience--I’m sharing a hugely valuable secret here--you score a big win when you put five people at tables for four instead. Five people, that magical prime number, pushes everyone to talk to everyone. The close proximity makes it more difficult to find a place for the bread basket, but far, far easier for people to actually do what they came to do, which is connect with one another.

Thousands of speeches later, I can tell you that the single worst thing an organizer can do to her event is sit people at tables for ten.

If you want to let the banquet manager run your next event, by all means, feel free. Just understand that his goals are different from yours.

       

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sâmbătă, 28 septembrie 2013

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Is the U.S. Headed in the Right Direction?

Posted: 28 Sep 2013 08:33 PM PDT

Polling Report has an interesting data series on Direction of the Country.

Here is the question: "In general, do you think things in the nation are headed in the right direction, or have they gotten off on the wrong track?"

The polls were conducted by Bloomberg, CBS News/New York Times, NBC News/Wall Street Journal, ABC News/Washington Post, Gallup, Pew, and other polling agencies.

The Bloomberg National Poll (show below) was conducted by Selzer & Company. Sept. 20-23, 2013. Sample size was 1,000 adults nationwide. The margin of error is ± 3.1.

To produce the table and graph below, I reordered the rows in date chronological order so that the most recent recent dates are last. These results are from Bloomberg polls, with dates as shown.

Click on the link above to see results from other polling agencies (in table, not chart form).

DateRight Direction %Wrong Track %Unsure %
9/10-14/0940528
12/3-7/0932599
3/19-22/1034588
7/9-12/1031636
10/7-10/1031645
12/4-7/1027667
3/4-7/1128639
6/17-20/1126668
6/15-18/1231627
9/21-24/1233607
12/7-10/1238557
2/15-18/1337549
5/31-6/3/1332608
9/20-23/1325687


The Wrong Track



click on chart for sharper image

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Future of Medicine: Meet Sedasys - Your New Robot Anesthesiologist

Posted: 28 Sep 2013 11:55 AM PDT

Johnson & Johnson's new sedation machine promises cheaper colonoscopies, but anesthesiologists, among the highest paid physicians, don't like it one bit. It's yet another case of robots replacing humans.

Please consider the New York Times article Robots vs. Anesthesiologists.
Anesthesiologists, who are among the highest-paid physicians, have long fought people in health care who target their specialty to curb costs. Now the doctors are confronting a different kind of foe: machines.

A new system called Sedasys, made by Johnson & Johnson, would automate the sedation of many patients undergoing colon-cancer screenings called colonoscopies. That could take anesthesiologists out of the room, eliminating a big source of income for the doctors. More than $1 billion is spent each year sedating patients undergoing otherwise painful colonoscopies, according to a RAND Corp. study that J&J sponsored.

An anesthesiologist's involvement typically adds $600 to $2,000 to the procedure's cost, according to a research letter published online by JAMA Internal Medicine in July.

By contrast, Sedasys would cost about $150 a procedure, according to people familiar with J&J's pricing plans. Hospitals and clinics won't buy the machines, instead paying a fee each time they use the device, these people say. The $150 would cover maintenance and all the costs of performing the procedure except the sedating drug used, which would add a few dollars, one of the people says.

As J&J prepares for a limited rollout, many anesthesiologists are sounding the alarm. They say the machine could endanger some patients because it uses a powerful drug known as propofol that could be used improperly. They also worry that if the anesthesiologist isn't in the room, he might not be able to get to an emergency fast enough to prevent harm.

During testing, none of the 1,700 patients sedated by Sedasys required rescuing, says Steven Shafer, editor in chief of the medical journal Anesthesia & Analgesia, who helped J&J develop the machine. He says that the machine's use is limited to healthy patients who aren't at risk for problems and that the machine has mechanisms to monitor patients and make rapid adjustments, such as boosting oxygen.

"These are all things an anesthesiologist would do," says Dr. Shafer, a professor of anesthesiology at Stanford University.

J&J is also developing a device that could cut anesthesiologists out of another popular procedure: surgery to insert tubes into the ears of children seeking relief from infections. J&J hopes that ear, nose and throat doctors will be able to insert its device with the push of a button, avoiding having to put the kids under anesthesia in a hospital.
Meet Sedasys - Your New Anesthesiologist

The median annual salary of Anesthesiologists is $286,000. That is ninth among all physicians and third among nonsurgeons surveyed by PayScale.com, a salary data and software firm.

Those costs are about to change. Here is a picture of Sedasys, who bills at $150 per use.



The image is from the Wall Street Journal report J&J's Sedasys Puts Challenge to Anesthesiologists

What cannot go on won't. And two of the things that cannot go on are spiraling education costs and spiraling healthcare costs.

I welcome these changes and assure you that more are coming. It's a good thing, but current Anesthesiologists won't see it that way.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The "Right Value" of the Indian Rupee

Posted: 28 Sep 2013 10:22 AM PDT

Reader Manish, from India, pinged me today regarding a statement made by India's Finance Minister that the Right Value of Rupee is 59-60 to a Dollar
Asserting that the right value of rupee is 59-60 to a dollar, Finance Minister P Chidambaram today said that government will make all efforts, including extending priority sector status to export credit, to boost shipments. "We think that based on the REER (real effective exchange rate) value, that (59-60) is the right level of the rupee and it should not overshoot its mark.
Manish writes ...
Hello Mish

The Indian Govt knows the 'right' value of the rupee. How? Maybe it's because the Indian Prime Minister is one of the world's foremost economists. Perhaps it's because our brilliant Harvard educated Finance Minister threw a dart on a board.

Anyway, I thought the idea was funny and thought you would too.

Manish
The "Right" Value in Pictures



Foolish Proclamations

Bureaucratic fools make proclamations based along the lines of what they want to see, even though they have no idea of the economic forces in play.

The notion that India's Finance Minister knows the true value of the Rupee is idiotic, and Manish knew in advance that I would agree.

Here's the deal: If governments worldwide would stop printing money and stop manipulating interest rates, we would find out in a flash what the true exchange rates should be.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Government Shutdown is a Fantastic Idea

Posted: 28 Sep 2013 12:06 AM PDT

Looking for a reason to support a government shutdown? If so, please consider Obama Stripped to Skeleton Staff in a Government Shutdown.
A U.S. government shutdown means President Barack Obama will have fewer people to cook meals, do the laundry, clean the floors or change the light bulbs, according to a White House contingency plan.

About three-fourths of president's 1,701-person staff would be sent home. The national security team would be cut back, fewer economists would be tracking the economy and there wouldn't be as many budget officials to track spending.

Of the total, 438 people work directly for the president. Under a shutdown, 129 could continue working, according to the contingency plan.

Biden, who has a staff of 24, would have had to make do with 12.

Obama's national security staff of 66 would be cut to 42. Similar staff cuts would be imposed at the White House Office of Management and Budget, the Council on Environmental Quality, the Council of Economic Advisers and the Office of National Drug Control Policy, which are all part of the president's executive office.
Fantastic Idea

If you think that a government shutdown is a fantastic idea (I sure do), then please contact your elected representatives and let them know.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Weekly Address: Averting a Government Shutdown and Expanding Access to Affordable Healthcare

Here's What's Happening Here at the White House
 
 
 
 
 
 
  Featured 

Weekly Address: Averting a Government Shutdown and Expanding Access to Affordable Healthcare

In this week’s address, President Obama says that on October 1st, a big part of the Affordable Care Act will go live and give uninsured Americans the chance to buy the same quality, affordable health care as everyone else. It is also the day when some Republicans in Congress might shut down the government just because they don’t like the law. The President urged Congress to both pass a budget by Monday and raise the nation’s debt ceiling so that we can keep growing the economy. He also said that those without health insurance and those who buy it on the individual market should visit HealthCare.gov to find out how to get covered on Tuesday.

Click here to watch this week's Weekly Address.

Visit HealthCare.gov to find out how to get covered on Tuesday.

Watch: President Obama's Weekly Address

 
 
  Top Stories

Talking Healthcare: While in New York on Tuesday, President Obama joined former President Bill Clinton at the Clinton Global Initiative Annual Meeting to discuss health care reform in America. “What we’re saying to people is, look, just go to the website yourself,” the President said. “Go to healthcare.gov; take a look at whether this is a good deal or not and make your own decision about whether this is good for you.” Check out their conversation here.

On Thursday, the President spoke at Prince George’s Community College in Largo, Maryland about why access to affordable health care is a cornerstone of middle-class security, and why he took on the work of fixing our broken health care system during his first term.

In the wealthiest nation on Earth, no one should go broke just because they get sick. In the United States of America, health care is not a privilege for the fortunate few -- it is a right.  And I knew that if we didn’t do something about our unfair and inefficient health care system, it would keep driving up our deficits, it would keep burdening our businesses, it would keep hurting our families, and it would keep holding back economic growth.

Starting October 1, those without health insurance will be able to visit the Health Insurance Marketplace and find health coverage that fits their needs – and their budget. A new report released on Wednesday found that Marketplace premiums are lower than initially expected. This means you can get high-quality, affordable health care under the Affordable Care Act for less than your cell phone bill. 

Make sure to watch the latest White House White Board to learn what the Affordable Care Act means for you.

United Nations General Assembly: On Monday and Tuesday, President Obama took part in the 68th session of the U.N. General Assembly. During his time there, the President held an event on supporting civil society, engaged in discussions with world leaders, and spoke in front of the General Assembly.

When he addressed the U.N. General Assembly on Tuesday, President Obama focused on Syria and the use of chemical weapons by the Assad regime, the prospects for diplomatic engagement with Iran, and potential for peace talks between Israelis and Palestinians. "For decades, the United Nations has in fact made a difference -- from helping to eradicate disease, to educating children, to brokering peace," the President said.

But like every generation of leaders, we face new and profound challenges, and this body continues to be tested. The question is whether we possess the wisdom and the courage, as nation-states and members of an international community, to squarely meet those challenges; whether the United Nations can meet the tests of our time.

Read his full remarks here.

President's Statement from the Briefing Room: President Obama spoke from the White House Briefing Room on Friday about new diplomatic efforts with the Islamic Republic of Iran and the situation with Congress. Earlier that day, President Obama spoke with President Rouhani of the Islamic Republic of Iran, which is the first communication between an American and Iranian President since 1979. Turning to Congress, the President stated the urgency of raising the debt ceiling and voting on a budget. "My message to Congress is this: Do not shut down the government.  Do not shut down the economy. Pass a budget on time. Pay our bills on time.  Refocus on the everyday concerns of the American people," the President said.   

Memorial Service for Victims of the Navy Yard Shooting: President Obama spoke at a memorial service on Sunday to honor the 12 victims of the Navy Yard shooting. “We know that no words we offer today are equal to the magnitude, to the depths of that loss,” the President told the families of the victims.

The President also spoke about the need to prevent future tragedies like this one. “I do not accept that we cannot find a common-sense way to preserve our traditions, including our basic Second Amendment freedoms and the rights of law-abiding gun owners, while at the same time reducing the gun violence that unleashes so much mayhem on a regular basis,” he said.

Vice President Biden Travels to Colorado: On Monday, Vice President Joe Biden traveled to Colorado to view the damage from recent flooding and survey the recovery efforts.

“When President Obama issued the disaster declaration for the state, as you all know, that provided additional assistance -- everything from cleaning up debris to helping people with their housing costs to boots on the ground that are providing technical assistance and helping the search and rescue,” the Vice President said.

Vice President Biden called the progress “remarkable” but said recovery efforts will continue as long as the people of Colorado need help rebuilding.

 

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Solving the Sub-Domain Equation: Predicting Traffic and Value when Merging Sub-Domains

Solving the Sub-Domain Equation: Predicting Traffic and Value when Merging Sub-Domains


Solving the Sub-Domain Equation: Predicting Traffic and Value when Merging Sub-Domains

Posted: 27 Sep 2013 04:43 AM PDT

Posted by russvirante

To sub-domain or not to sub-domain, that is the question. Should you keep your content on separate sub-domains or the same domain? If I do merge my sub-domains, will I gain or lose traffic? How much?

Since my first days in SEO back in 2004, the sub-folder vs. sub-domain debate has echoed through nearly every site architecture discussion in which I have participated. It seems trivial in many respects that we would focus so intently on what essentially boils down to the ordering of words in a URL, especially given that www. itself is a sub-domain. However, for a long time, there has been good reason to consider the question vary carefully. Today I am writing about the problem in general, and I propose a programmatic strategy for answering the sub-domain/sub-folder debate.

For the purposes of this article, let's assume there is a company named Example Business that sells baseball cards, baseball jerseys and baseball hats. They have two choices for setting up their site architecture.

They can use sub-domains...

Or, they can use directories...

Many of you have probably dealt with the exact question, and for some of you this question has reared its head dozens if not hundreds of times. For those of you less familiar problem, let's do a brief history on sub-domains, sub-folders, and their interaction with Google's algo so we can get a feeling of the landscape.

Sub-domains and SEOs: A quick historical recap

First, really quickly, here is the breakdown of your average URL. We are most interested in comparing the sub-domain with the directory to determine which might be better for rankings.

parts of a url

This may date me a bit, either as a Noob or an Old-Timer depending on when you got in the game. I started directly after the Florida update in 2003. At that time, if I recall correctly, the sub-domain / sub-folder debate was not quite as pronounced. Most of the decisions we were making at the time regarding sub-domain had more to do with quick technical solutions (ie: putting one sub-domain on a different machine) than with explicit search optimization.

However, it seemed at that time our goal as SEOs was merely to find one more place to shove a keyword. Whether we used dashes (hell, I bought a double--dashed domain at one point) or sub-domains, Google's algos seemed to, at least temporarily, value the sub-domain to be keyword rich. Domains were expensive, but sub-domains were free. Many SEOs, myself included, began rolling out sites with tons of unique, keyword-rich sub-domains.

Google wasn't blind to this manipulation, though, and beginning around 2004, with some degree of effectiveness Google was able to kill off an apparent benefit to sub-domain spam. However, it still seemed to persist to some degree in discussions from 2006, 2007, 2008, and 2009. For a while, there seemed to be a feather in the cap of sub-domains specifically for SEO.

Fast forward a few years and Google introduces a new, wonderful feature called host crowding and indented results. Many of you likely remember this feature, but essentially, if you had two pages from the same host ranking in the top 10, the second would be pulled up directly under the other and given an indent for helpful organization. This was a huge blow to sub-domain strategies. Now ranking positions 1 and 10 on the same host was essentially the same as owning the top two positions, but on separate hosts it was valueless. In this case, it would make sense for "Example Business" to use sub-folders rather than sub-domains. If the content shared the same sub-domain, every time their website had 2 listings in the top 10 for a keyword, the second would be tucked up nicely under the first, effectively jumping multiple positions. If they were on separate sub-domains, they would not get this benefit.

Host Crowding Made Consolidating to a Single Domain Beneficial

Google was not done, however. They have since taken away our beautiful indented listings and deliberate host crowding and, at the same time given us Panda. Initial takes on Panda indicated that sub-domain and topical sub-domain segregation could bring positive results as Panda was applied at a host name level. Now it might make sense for "Example Business" to use sub-domains, especially if segmenting off low quality user generated content.

Given these changes, it is understandable why the sub-domain debate has raged on. While many have tried to discredit the debate altogether, there are legitimate, algorithmic reasons to choose a sub-domain or a sub-folder.

Solving the sub-domain equation

One of the beauties of contemporary SEO is having access to far better data than we've ever had. While I do lament the loss of keyword data in Google Analytics, so much other data is available at our fingertips than ever before. We now have the ability to transform intuition by smart SEOs into cold hard math.

When Virante, the company of which I am CTO, was approached a few months ago by a large website to help answer this question, we jumped at the opportunity. I now had the capability of turning my assumptions and my confidences into variables and variances and build a better solution. The client had chosen to go with the subdomain method for many years. They had heard concepts like "Domain Authority" and wondered if their subdomains spread themselves too thin. Should they merge their subdomains together? All of them, or just a few?

Choosing a mathematical model for analysis

OK, now for the fun stuff. There are a lot of things that we as SEOs don't know, but have a pretty good idea about. We might call these assumptions, gut instincts, experience, intuitions but, in math, we can refer to them as variables. For each of these assumptions, we also have confidence levels. We might be very confident about one assumption of ours (like backlinks improve rankings) and less confident about another (longer content improves rankings). So, we have our variables and we have how confident we are about them. When we don't know the actual values of these variables (in science we would refer to them as independent variables), Monte Carlo simulations often prove to be one of the most effective mathematical models we can use.

Definition: Monte Carlo methods (or Monte Carlo experiments) are a broad class of computational algorithms that rely on repeated random sampling to obtain numerical results; i.e., by running simulations many times over in order to calculate those same probabilities heuristically just like actually playing and recording your results in a real casino situation: hence the name. - Wikipedia

With Monte Carlo simulations, we essentially brute force our way to an answer. We come up with all of the possibilities, drop them into a bag, and pick one from the bag over and over again until we have an average result. Or think about it this way. Let's say I handed you a bag with 10000 marbles and asked you which color of marble in the bag is most common. You could pour them all out and try and count them, or you could shake the bag and then pick out 1 marble at time. Eventually, you would have a good sample of the marbles and be able to estimate that answer without having to count them all.

We can do the same thing here. Instead of asking which color a marble is, we ask "If I merge one URL with another, what is the likelihood that it will receive more traffic from Google?". We then just have to load all of the variables that go into answering that question into our proverbial bag (a database) and randomly select over and over again to get an estimate.

So here are the details, hopefully you can follow and do this yourself.

Step 1: Determine the keyword landscape

The thing we need to know is every possible keyword for which the client might rank, how much potential traffic is available for that keyword, and how valuable is that keyword in terms of CPC. The CPC value allows us to determine the true value of the traffic, not just the volume. We want to improve rankings for valuable keywords more than random ones. This client in particular is in a very competitive industry that relies on a huge number of mid/long-tail keywords. We built a list of over 46,000 keywords related to their industry using GrepWords (you could use SEMRush to do the same).

Step 2: Determine the search landscape

We now need to know where they actually rank for these keywords and we need to know all the potential sub-domains we might need to test. We queued all 46K keywords with the AuthorityLabs API and within 24 hours we had the top 100 results in Google for each. We then parsed the data and extracted the position and rank of every sub-domain for the site. There were around 25 sub-domains that we discovered, but ultimately chose to only analyze the 9 that made up the majority of non-branded traffic.

Step 3: Determine the link overlap

Finally, we need to know about the links pointing to these sub-domains. If they all have links from the same sites, we might not get any benefit when we merge the sub-domains together. Using Mozscape API Link Metrics call, we pulled down the root linking domains for each site. When we do our Monte Carlo simulation, we can determine how their link profiles overlap and make decisions based on that impact.

Step 4: Create our assumptions

As we have mentioned, there are a lot of things we don't know, but we have a good idea about. Here we get to add in our assumptions as variables. You will see variables expressed as X and Y in these assumptions. This is where your expertise as an SEO comes into play.


Question 1: If two sub-domains rank for the same keyword in the top 10, what happens to the top ranked keyword?
Assumption 1: X% of the time, the second ranking will be lost as Google values domain diversity.
Example: It turns out that http://baseball-jerseys.example.com and http://baseball-hats.example.com both rank in the top 10 for the keyword "Baseball Hats and Jerseys". We assume that 30% of the time, the lower of the two rankings will be lost because Google values domain diversity.

Question 2: If two sub-domains rank for the same keyword in the top 10, what happens to the top ranked subdomain?
Assumption 2: Depending on the X% of link overlap, there is a Y% chance of improving 1 position.
Example: It turns out that http://baseball-jerseys.example.com and http://baseball-hats.example.com both rank in the top 10 for the keyword "Baseball Hats and Jerseys". We assume that 70% of the time, based on X% of link overlap, the top ranking page will move up 1 position.

Question 3: If two sub-domains merge, what happens to all rankings of top ranked subdomain, even when dual rankings are not present?
Assumption 3: Depending on X% of link overlap, there is a Y% chance of improving 1 position.
Example: On keywords where http://baseball-jerseys.example.com and http://baseball-hats.example.com don't have overlapping keyword rankings, we that 20% of the time, based on X% of link overlap, their keywords will improve 1 position.

These are just some of the questions you might want to include in your modeling method. There might be other factors you want to take into account, and you certainly can. The model can be quite flexible.

Step 5: Try not to set fire to the computer

So now that we have our variables, the idea is to pick the proverbial marble out of the bag. We will create a random scenario using our assumptions, sub-domains and keywords and determine what the result of that single random scenario is. We will then repeat this hundreds of thousands of times to get the average result for each sub-domain grouping.


We essentially need to do the following...

  1. Select a random set of sub-domains.
    For example, it might be sub-domains 1, 2 and 4. It could also be all of the sub-domains.
  2. Determine the link overlap between the sub-domains
  3. Loop through every keyword ranking those sub-domains we determined when building the Keyword and Search Landscape back in Step 2. Then, for each ranking...
    1. Randomly select our answer to #1 (ie: is this the 3 out of 10 times that we will lose rankings?)
    2. Randomly select our answer to #2 (ie: is this the 7 out of 10 times that we will increase rankings?)
    3. Randomly select our answer to #3 (ie: is this the 2 out of 10 times we will increase rankings?)
  4. Find out what our new traffic and search value will be.
    Once you apply those variables above, you can guess what the new ranking will be. Use the Search Volume, CPC, and estimated CTR by ranking to determine what the new traffic and traffic value will be.
  5. Add It Up
    Add up the estimated search volume and the estimated search value for each of the keywords.
  6. Store that result
  7. Repeat hundreds of thousands of times.
    In our case, we ended up repeating around 800,000 times to make sure we had a tight variance around the individual combinations.

Step 6: Analyze the results

OK, so now you have 800,000 results, so what do we do? The first thing we do segment those results by their sub-domain combination. In this case, we had little over 500 different sub-domain combinations. Second, we an average traffic and traffic value for each of those sub-domain combinations from those 800,000 results. We can then graph all those results to see which sub-domain combination had, on average, the highest predicted Traffic and Value.

To be honest, graphs are a terrible way of figuring out the answer, but it is the best tool we have to convey it in a blog post. You can see exactly why below. With over 500 different potential sub-domain combinations, it is difficult to visualize all of them at the same time. In the graph below, you see all of them, with each bar representing the average score for an individual sub-domain combination. For all subsequent graphs, I have taken a random sample of only 50 of the sub-domain combinations so it is easier to visualize.

Big graph

As mentioned previously, one of the things we try and predict is not just the volume of the traffic, but also the value of that traffic by multiplying it by CPC value of each keyword for which they rank. This is important if you care more about valuable commercial terms than just any keyword for which they might rank.

As the graph above exposes, there were some sub-domain combinations that influenced traffic more than value, and vice-versa. With this simulation, we could find a sub-domain combination that maximized the value or the traffic equation. A company that makes money off of display advertising might prefer to look at traffic, while one that makes money off of selling goods would likely pay more attention to the traffic value number.

There were some neat trends that the Monte Carlo simulation revealed. Of the sub-domains tested, 3 in particular tended to have a negative rankings effect on nearly all of the combinations. Each time a good sub-domain was merged, these 3 would intermix with combinations to slightly lower the traffic volume and traffic values. It turned out these 3 sub-domains had very few backlinks and only brand keyword rankings. Subsequently, there was huge keyword overlaps and almost no net link benefit when merged. We were easily able to exclude these from the sub-domain merger plan. We would have never guessed this, or seen this trend, without this kind of mathematical modeling.

Finally, we were able to look closely at sub-domain merger combinations that offered more search value and less search traffic, or vice-versa. Ultimately, though, 3 options vied for the top spot. They were statistically indistinguishable from one another in terms of potential traffic and traffic value. This meant the client wasn't tied to a single potential solution, they could weigh other factors like the difficulty of merging some sub-domains and internal political concerns.

Modeling uncertainty

As SEOs, there is a ton we don't know. Over time, we build a huge amount of assumptions and, with those assumptions, levels of confidence for each. I am very confident that a 301 redirect will pass along rankings, but not 100%. I am pretty confident that keyword usage in the title improves rankings, but not 100% confident. The beauty of the Monte Carlo approach is that it allows us to graph our uncertainties.

The graphs you saw above were the averages (means) for each of the sub-domain combinations. There were actually hundreds of different outcomes generated for each of those sub-domain combinations. If we were to plot those different outcomes, they may look like what you see in the image directly above. If I had just made a gut decision and modeled what I thought, without giving a range, I would have come up with only a single data point. Instead, I estimated my uncertainties, turned them into a range of values, and allowed the math to tell me how those uncertainties would play out. We put what we don't know in the graph, not just what we do know. By graphing all of the possibilities, I can present a more accurate, albeit less specific, answer to my client. Perhaps a better way of putting it is this: when we just go with our gut, we are choosing 1 marble out of the bag and hoping it is the right one.

Takeaways

  1. If you are an agency or consultant, it is time to step up your game. Your gut instinct may be better than anyone else's, but there are better ways to use your knowledge to get at an answer than just think it through.

  2. Don't assume that anything in our industry is unknowable. The uncertainty that exists is largely because we, as an industry, have not yet chosen to adopt the tools that are plainly available to us in other sciences that can take into account those uncertainties. Stop looking confused and grab a scientist or statistician to bring on board.

  3. Whenever possible, look to data. As a small business owner or marketer, demand that your provider give you sound, verifiable reasons for making changes.

  4. When in doubt, repeat. Always be testing and always repeat your tests. Making confident, research-driven decisions will give you an advantage over your competition that they can't hope to undo.

Follow up

This is an exciting time for search marketers. Our industry is rapidly maturing in both its access to data and its usage of improved techniques. If you have any more questions about this, feel free to ask in the comments below or hit me up on twitter (@rjonesx). I'd love to talk through more ideas for improvements you might have!


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Seth's Blog : When to speak up

 

When to speak up

"This plane is headed to Dallas. If Dallas isn't your destination, this would be a great time to deplane."

After a decision is taken and the organization is moving forward, it's fun and easy to be the critic, the rogue and the skeptic. Easy because the chances that you will have to actually take responsibility for your alternative view of the future are slim indeed--the plane is already headed somewhere, it can't go both places and you missed (or bungled) your chance to change the decision.

No, the time to speak up is before the decision is made, when not only do you have a chance to change where the organization is going, but you have the responsibility to deliver on your vision.

We don't have time to revisit every decision our organization makes. We merely have the time to do the best we can to execute on what we've already committed to do.

Rooting for your team to fail is as bad as it sounds. Even if you said early and often that this path was a stupid one, that this destination makes no sense--if you're on the plane, if you're in the meeting, if you decided to play the game--then once the journey starts, your job is to get us there, safe and sound.

And then come to the next meeting with a better plan about the next decision.

       

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