luni, 16 iulie 2012

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


Calpers Pension Plan Reports 1% Growth, Plan Assumes 7.5% Growth; Stunning "What If" Charts at Various Compounded Rates

Posted: 16 Jul 2012 11:32 PM PDT

The California Public Employees' Retirement System (CalPERS) is an agency that manages pension and health benefits for more than 1.6 million California public employees, retirees, and their families. Its pension plan assumes 7.5% annual growth.

For fiscal year ending 2012 CalPERS Reports Preliminary Performance of 1 Percent.

How Underfunded is CalPERS?

Bear in mind that CalPERS was massively underfunded before this report. How underfunded?

Good question. Please consider CalPERS Lies About Equity Returns
CalPERS is both corrupt and incompetent.  If it were a private firm, the lies about return on investments would send executives to jail and billions in lawsuits filed.

"The California Public Employees' Retirement System (CalPERS) is the biggest public pension in the country. It is also deeply underfunded. Depending on the measure used, they have just 55-75% of money needed for future expenses while 80% is considered the minimum to be safe. Their return is currently less than 99% of big pension funds.

On March 12, CalPERS voted to lower their expected return from 7.75% to 7.5%, ignoring the advice of their own chief actuary that it should be 7.25%. More than a few investment professionals consider a projected rate of 7.75% to be unrealistically high in these times and question whether 7.25% is realistic."

Now we know that CalPERS is in the lowest 1% of all pension funds—what else would you expect from a California government agency?
"What If" Charts at Various Compounded Rates

Let's pretend that CalPERS is 100% funded. Already that is one hell of a pretend job, but assuming so, what will CalPERS underfunding look like at various compound plan performance rates?

CalPERS currently has $233 billion in assets. It assumes 7.5% annual growth. What if it only returns 5%? or 2.5%?

In the following charts the left scale is in billions of dollars.
The bottom scale is in years.
Base assumption is CalPERS is currently fully funded (which it clearly is not)

CalPERS Assets Compounded at 7.5%, 5.0%, 2.5%



CalPERS Underfunding at 5.0% and 2.5%



I believe annualized returns for the next 10 years will be between 0% and 5% at most. I highly doubt they will be as good as 5%.

With that in mind, lets take a closer look at projections for the next 10 years.

CalPERS 10-Year Asset Growth Projections



CalPERS 10-Year Projected Underfunding at 5.0% and 2.5%



Once again the above charts assume pension plans are fully funded and they ignore effects of drawdowns if exceptionally low returns happen.

Negative Returns for 10 Years?

I have made the case that Negative Annualized Stock Market Returns for the Next 10 Years or Longer are Far More Likely Than You Think.

For follow-up posts please consider


Assume the Best

Even if you assume negative or near-zero returns are impossible (ignoring Japan for the last 20 years and the S&P 500 since the 2000 peak) clearly cumulative annual returns over extended periods are possible.

Given that pension plans are typically heavily invested in bonds, and the current 10-year treasury rate is 1.48%, it is going to be damn difficult for pension plans to come close to the annualized projection of 7.5% made by CalPERS and others.

Moreover, the more risk pension plans take attempting to meet near-impossible goals, the more likely it is that they will blow sky high in taking that risk.

I believe pension plans will not avoid the next huge drawdown and will be lucky to see 4% annualized growth.

However, let's for the moment assume positive annual growth of 2.5% to 5%. Let's assume plans are not currently underfunded. Let's assume pension plans avoid the next big drawdown.

Even with those optimistic assumptions (wildly optimistic as pertains to CalPERS being currently fully funded), CalPERS still rates to be deep in the hole 10 years from today.

Lesson in Exponential Math

If that still does not shock you, hopefully the following YouTube video on Exponential Math will.



If you are not familiar with exponential functions such as 7.5% annualized growth assumed perpetually by CalPERS, please play the video above. Perhaps you should play it even if you are.

Those in CalPERS counting on 7.5% annual growth are going to instead see clawbacks, reduced rates, or outright default.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Still More on Credit-Worthiness of Bank Lending in Housing Bubble: Loan Originations vs. True Bank Lending

Posted: 16 Jul 2012 12:11 PM PDT

In response to Reader Questions on "Credit-Worthiness": Did Banks Give Mortgages to Non-Creditworthy Borrowers? I received an email from reader David, who wanted to expand on point number 5 below from my post.

This is what I stated, adding the words [banks thought]. The email from reader David follows this recap.
Five Reasons Banks Extended Credit in Housing Bubble Years

  1. [Banks thought] People would pay mortgage loans because they always did
  2. [Banks thought] Housing prices would rise sufficiently to cover defaults
  3. [Banks thought] Mortgage interest rates to subprime borrowers were high enough to cover risk
  4. [Banks thought] Defaults would happen over a long period of time, not quickly concentrated
  5. Banks could pass the trash to Fannie Mae and Freddie Mac (without clawbacks for non-performance), and/or loans could be sliced and diced in tranches to investors

If any of those conditions were true, then banks were indeed making loans to "credit-worthy" borrowers. Subprime borrowers did pay a huge penalty rate. Multiple combinations of the above five points are likely.

Huge Mistakes Coupled With Greed

Banks made huge mistakes because all five conditions above failed, far sooner than banks or the Fed expected. Recall that Bernanke did not believe there was a housing bubble at all!

Thus, at the time, banks thought they were making creditworthy loans.

They thought wrong, in a big way, and they were very greedy as well. Greed coupled with poor thinking is a very bad combination.

What About Now?

Banks are not lending now for three reasons

  1. Banks are capital impaired
  2. Banks are worried about being repaid
  3. The relatively small pool of credit-worthy borrowers who banks would lend to right now, do not want credit

Stunning Change in Attitudes

Another way of looking at the five points pertaining to the "housing bubble years" is there has been a stunning change in attitudes regarding how banks perceive "credit-worthiness" as well as a stunning change in willingness of consumers to go deeper in debt.

Conclusion: Then as now, banks only lend to customers they think are credit-worthy.

However, Attitudes on what it takes to be "credit-worthy" have changed.

Attitudes are the key to understanding this apparent conundrum.
Email Regarding Point Number Five

Reader David wants to emphasize point number five ...
Hello Mish

Please emphasize that in the mortgage bubble, banks did not lend for the most part, they originated. Thus creditworthiness was not a factor since the agents who would face most of the losses were not banks, they were instead Fannie/Freddie, investors of MBS paper and especially investors of structured MBS paper and CDO's.

The banks themselves only held inventory of super-senior paper which they expected had enough cushion to absorb any losses. Moreover, the banks held this paper off-balance sheet in SIV's and other conduits which technically were separate from the bank.

Thus the loan-origination process asked not whether the borrower was credit-worthy, it asked only whether that loan could be sold on for a profit.
David is clearly correct.

So I wish to reiterate ... If banks think they will make enough profit to compensate for the risks they take, then they make loans.

If they think they will make adequate profit on the loans, then by definition, they think they are making credit-worthy loans.

Of course, as I pointed out, what banks thought would happen and what actually happened are two different things. Regardless of what did happen, banks thought they were making credit-worthy loans.

Banks did originate tons of garbage (on purpose), but only with the intent to immediately pass the trash, not to hold the loan. The distinction is extremely important.

Recall this discussion of "credit-worthy" lending is but a subpoint in the discussion of my original post regarding bank reserves: Can Bernanke Force Banks to Lend by Halting Interest on Excess Reserves?.

Regardless of any discussion of credit-worthy lending, the answer is still the same: Bernanke cannot force banks to lend by lowering interest on excess reserves to zero.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


Peugeot Has 51% Chance of Debt Default; Hollande Says France Will Not Let Peugeot Lay Off Workers

Posted: 16 Jul 2012 10:00 AM PDT

The incredibly inept policies of French president Francois Hollande are back in the news.

Hollande is following up on his proposal to not let companies fire workers, starting right now with French car maker Peugeot's Plan to Cut 8,000 Jobs, Close Plant

An article in El Pais has better details of Hollande's denial of reality than I have found elsewhere.

My friend Bran who lives in Spain offers this translation key paragraphs of Hollande's "Moralization" of Political Life.
Hollande says "Peugeot's plan is unacceptable and will be renegotiated."

Hollande accused Peugeot owners of having delayed the restructuring plan with the excuse of not interfering in the election campaign and denied that the biggest problem are labor costs, as claimed.

"There is also a strategy, a market and some shareholders who have distributed a dividends rather than reinvest them," he said.

The solution? "Have an independent expert examine the company, find a way out of the plan to close the plants, and create a strategic plan for the automotive industry and encourage the purchase of French products in France."
Peugeot Has 51% Chance of Debt Default

Just to highlight how out of touch with reality Hollande is, please consider Peugeot Has 51% Chance of Debt Default, Credit Swaps Show
PSA Peugeot Citroen (UG) bond-insurance costs surged to a record, trading as if the French automaker has a 51 percent chance of defaulting as it cuts thousands of jobs and closes a plant.

Credit-default swaps on the carmaker's debt jumped 50 basis points to an all-time high of 800 basis points at 4:30 p.m. in London, Bloomberg swaps prices show. The contracts have doubled since March and now signal a 51 percent probability of default within five years. Caroline Brugier-Corbiere, a spokeswoman for Peugeot, declined to comment.

Peugeot's cash reserves allow it to "survive for one to two years," said Xavier Caroen, a Zurich-based Kepler Capital Markets analyst who has a "hold" rating on the company. "We hope the French government lets them cut production and shut some sites in France, or they won't have any earnings in the future," Caroen said.
Hollande Turns on the Heat

The Financial Times reports Hollande turns heat on Peugeot
François Hollande, France's Socialist president, has accused Peugeot's chief executive of ducking the blame for the crisis at the French carmaker, ratcheting up the pressure ahead of meetings this week about its plan to lay off 6,500 workers.

Philippe Varin, the Peugeot chief, says the hefty social charges imposed on French employers are putting an impossible burden on his company as it tries to compete globally, calling on the new Socialist administration to make a "massive" cut to the charges.

"It's too easy to blame labour costs," he said. "There were bad strategic choices. There were delays in taking difficult decisions and shareholders who were too hungry for dividends when investment should have been the priority."
Dose of Reality

It does not matter one iota whether or not Peugeot delayed firing workers attempting to influence the election. Whether or not Peugeot should have cut dividends earlier (yes they should have), is also irrelevant.

What does matter is Peugeot is doomed to bankruptcy if it cannot fire workers.

Expected Slowdown

This slowdown in autos was not unexpected by me (but probably was unexpected by the bulk of economists). I wrote about it in advance in my article Global Collapse In Auto Sales Coming Up.

The above article discusses a plunge in new manufacturing orders in the US, China, Europe, and Japan, with email anecdotes from forecasts from a worker at Bosch, the world's largest auto parts manufacturer who noted among other things "sales forecasts down again and more plant closure days coming up".

In the midst of slumping demand, there is no other rational choice than reduce hours.

Economically Insane Proposal

On June 16, I wrote ... If socialists take control of both houses in French parliament as expected, president François Hollande would have free rein to carry out his stated policies such as hire more public workers, raise taxes on the rich, and Wreck France With Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It"

Well, the socialists did take control of both houses of French parliament, and Hollande is following through. This is what I said previously ....

Four Things, All of Them Bad

  1. Mass layoffs will occur before the law passes.
  2. Companies will move any jobs they can overseas.   
  3. Ongoing, if it's difficult to fire people, companies will not hire them in the first place. 
  4. Corporate profits will collapse along with the stock market should the need to fire people arise.

The proposal to force companies to sell plants rather than fire workers as outlined by Industry Minister Arnaud Montebourg and Labour Minister Michel Sapin is nothing short of economic insanity.

Peugeot is indeed attempting to fire workers before Hollande can pass changes that would "Make Layoffs So Expensive For Companies That It's Not Worth It"

Results  Known in Advance

The results are easy enough to predict in advance.

Add to that list of four items...

5. Numerous bankruptcies
6. Massively rising unemployment - Exactly the opposite of what the law intends to happen.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List


It's time to keep the conversation going

The White House Monday, July 16, 2012
 

It's time to keep the conversation going

If we're going to get traction for President Obama's proposal to help responsible homeowners refinance their mortgages, we need to make sure as many people get the facts as possible.

That's why we recently organized a discussion between Secretary of Housing and Urban Development Shaun Donovan and a group of homeowners from across the country to talk about the President's plan.

And now, we want to keep the conversation going.

So take a moment to watch these homeowners describe their situations to Secretary Donovan, then share your own story.

In the past month, we've received tens of thousands of messages from Americans who support President Obama's proposal. We have shared them with advisors to the President, published them on WhiteHouse.gov, and posted them to Twitter and Facebook.

Again and again, the facts of their stories are the same. We're hearing from people who've done everything right, who have made their payments on time each month, and who are locked out of lower payments through no fault of their own.

They want a refinancing process that's simpler. And if we can get a vote in Congress, that's exactly what President Obama's proposal will give them.

But we are running out of time.

So add your voice to the discussion now, and help us bring this issue to the top of the agenda. We'll feature stories on WhiteHouse.gov, and make sure they're part of the conversation here in Washington:

http://www.whitehouse.gov/why-refi

Thanks.

P.S. -- Watch the full Google+ Hangout with Secretary Donovan here.

Stay Connected

 

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Why Link Building Strategies Fail

Why Link Building Strategies Fail


Why Link Building Strategies Fail

Posted: 15 Jul 2012 07:57 PM PDT

Posted by Adria Saracino

I've executed a lot of failed link building strategies.

Some of these strategies I created. Others were handed to me. Over the years, I've discovered that the same reasons for failure kept cropping up. Thus, I thought it'd be helpful to outline the mistakes I've made and seen. Hopefully this helps you avoid the stress and headaches I've experienced along the way.

Here are the ways in which I've seen link building strategies fail and how you can make sure you don't get duped by these common pitfalls.

Link Building Strategy Content Strategy which Link Bait

Let me break it down...

The content strategy is the road map designed to create epic pieces of content. The link building strategy is how you plan on getting links. Sometimes you use content from your content strategy to get links, but sometimes you don't. Sometimes the content from your content strategy helps generate links all by itself, such as when people find it easily in search engines and start sharing it on their own sites. This process is not part of the link building strategy.

Producing a piece of link bait isn't a content strategy, either. Link bait is a piece of content that is created with the hopes of attracting a load of links. Link bait creators hope their content will go viral, and let me tell you, it is really difficult to churn out link bait after you produce a piece that goes viral. You're lucky if one goes viral, let alone multiple. Thus, link bait isn't a content strategy as it's not really sustainable.

In addition, link bait can create a bad user experience, say in the case that you are churning out infographic after infographic all hosted on your company blog. Frequent visitors to that blog might become alienated, especially in "boring" or small niches where you often need to think of tangential topics and audiences to make a successful piece of link bait.

Why should you know (and care about) the difference? Because getting link bait and content strategy confused can set your team up for failure. It often results in expectations not being met, as they will be unrealistic from the start. Plus, each of these strategies answers different questions as they are being created — such as the target market, goals, and metrics — all of which are vital to success. Miss one part and you could be missing an important piece of the big picture.

How to Win:

Create a content strategy that includes link bait (isn't all link bait) and figure out where you can leverage the content for link building. Simultaneously, create a link building strategy that drives additional links above and beyond what your content can do. For even more win, consider how you can coordinate with your social strategy to really leverage both your content and link building efforts.

The key here is collaboration and integration, which will ensure you don't miss opportunities for a win. Think you only have the resources to pursue one strategy (which I will call BS on)? I love this controversial article on content marketing being better than link building. I'm not saying I agree or disagree, I just love when authors take an aggressive stance :)

The "Strategy" Part is Left Out

Trusty old Wikipedia defines a strategy as, "A plan of action designed to achieve a vision." Unfortunately, a lot of times the planning and designing parts are left out, leaving a grandiose vision but no real road map for getting there. I see this a lot with companies who pride themselves in being agile. Sometimes they are just too agile, too shotgun and reckless, saying "let's go, go, go" and hoping to see some wins later on.

How to Win:

No brainer here: create a strategy. Know that executing one campaign after another with no connecting thread is not a strategy. Here are the top-level pieces both a winning content and link building strategy should have.

  • What - What is the purpose? What are the goals?
  • Who - This is two part, 1) Who will be accountable for the project? 2) Who is the target audience?
  • How - Again two part, 1) How will you reach this goal(s)? 2) How will you track it?
  • Why - Why is this piece of the strategy being pursued? This should be answered from both the business and user perspective.
  • When - When will this be executed? Create timelines and deadlines to execute each piece of the strategy.
  • Where - Where does this fit in? Knowing how it integrates with other efforts and where it fits into the grand scheme of things is essential.

Rather than re-invent the wheel, here are some useful resources for how to create link building and content strategies:

No Defined Goals

Part of a strategy is having a vision, but to achieve that vision you need to set goals. Typically, the best strategies have a number of goals, broken into both short term and long term. Some will argue that "ranking #1 for [insert highly competitive short tail keyword here]" is a goal, but since it is pretty lofty you need to ask yourself what short term goals can your team action in order to be number one.

How to Win:

Set up both long-term and short-term goals. Generally, the short-term goals will be stepping stones for reaching long-term goals, creating a tree of goals with actionable milestones. I found an acronym from a UK government agency that I thought was wonderful. It says that all goals are SMART:

characteristics of SMART goals

No Urgency or Tracking in Place

In my experience, in-house link building teams tend to fall victim to this more often than agencies. Just as a link building strategy should have goals, there should be some urgency in reaching them. This is where tracking comes into play. I see a lack of urgency is often correlated with not having a system in place for inspiring that urgency. To be clear, what I mean when I say "urgency" is a timeline for reaching goals - essentially deadlines.

Every link builder is going to find a way to track how many links he/she is getting. It's human nature - we're out trying to get something and we want to see if we won or not. While I still find that the market struggles with developing a completely automated and instant way of tracking incoming links, there are manual processes that can aid in tracking how many links are received. However, this isn't the only tracking that's important.

Knowing the number of links is great, but what are those links doing for rankings? How have those incoming links fluctuated over the duration of the project? What does the anchor text spread look like? These are bigger picture questions that some teams fail to answer in tracking. It makes it very difficult to measure the effectiveness and ROI of your link building team if you aren't looking at tracking data over time. And what is more important is making sure you share these results with everyone on the team. The first set of people who should know the results should be the ones doing the work. Too often the link builders are left out of the loop and given indirect feedback like "we need to get more links."

How to Win:

Here is a top-level road map for implementing tracking procedures:

  • After defining the goals, determine KPIs for measuring if those goals have been reached.
  • Create a system for monitoring these KPIs, such as through Analytics or third-party tracking tools.
  • Regularly analyze the data. Aggregate it into digestible visualizations to help make sense of it all.
  • Draw conclusions.
  • Share these conclusions with the whole team.
  • As more data is collected, compare new data with historical results. Be sure to share these with the team as well.
  • Reassess strategy and determine where changes need to be made if applicable.

Expectations Aren't Managed

managing expectations comic Dilbert

Everyone is going to have his/her own opinion, from the bosses to the link builders themselves. Those who own the project need to set a realistic bar and constantly communicate what everyone can expect. Keep in mind that some people won't be as forthcoming with their expectations, so the key is to ask, and preferably have their expectations documented somewhere for reference to hold everyone accountable.

How to Win:

It's safe to set the bar low so you can exceed expectations, but the key in that is just generally setting the bar. If you want to go even further, epmphasize constant and clear communication. A good workflow includes:

  1. Learning what is expected from each party.
  2. Negotiating those expectations.
  3. Consistently reporting on where your team is at in meeting those expectations.
  4. Reporting on the final results - were those expectations met or exceeded?

Resources Spread too Thin

I see this all the time. Let's put it in perspective with a hypothetical story.

The boss decides the company should try it's hand at some link building, so he designates one person to give it a go. Let's say it's Susy the copy writer. Off the cuff, the boss decides he wants Susy to start getting 30-50 links a week, and of course to complete all the other copy writing tasks required of her. With a pat on the back he tells new link builder Susy good luck.

It's not difficult to guess that Susy the link builder comes back with less than stellar results. Not only is the boss disappointed, but he also decides link building isn't good for the company. Susy is left feeling like she failed, disappointed in herself, and aggravated at her boss.

Link building isn't a get rich quick scheme..or at least it shouldn't be viewed as one.

How to Win:

Devote ample resources to your link building project. This can be easier said than done, especially when you operate a small business. A good start is to hire one person whose sole job function is link building. Susy the copy writer shouldn't also be dabbling in link building as nobody simply dabbles in link building.

Make sure to monitor everything he/she does in order to make a case study for obtaining more people and resources for link building. Especially when just starting out, companies can see a lot of big wins so make sure to track before and after progress to prove your case.

Depending on which strategy(ies) you pursue, the ideal team consists of:

  • Link builder(s) - Remember, results are determined by time x cost = # of wins. For more wins, you need to amp up the variables.
  • Content person(s) - A lot of link building strategies require content, so a strong team of writers and editors can help scale link building.
  • Creative person(s) - Designers and developers can really help amp up the content you produce.
  • Researcher(s) - Having someone who is an expert in data can make sure your resources are credible and your content is solid.
  • PR person(s) - This person has his/her finger on the pulse of media, knowing what is trending and what journalists are interested in.
  • Project manager - Sometimes this role isn't as explicit as this title suggests, but someone in charge of tracking and keeping an eye on the big picture can give your link builders more time to execute, rather than get caught up in monitoring.
  • Social media person(s) - Not essential, but it's great to have a dedicated person to leverage the link building opportunities social media presents.

Content is Consistently Crappy

This feels like it should be a no-brainer, but plenty of companies fail to make epic content. Sometimes this caused by looking for quick wins, resulting in not enough effort or resources devoted to content creation. However, a more common reason is not due to lack of experience, but falls on the fact that people just don't know. People tend to fall in love with their own ideas (often which are too promotional) and have trouble seeing whether or not the idea will really speak to anyone.

How to Win:

First, know that the content creation process is not a sweatshop. Content should be made with a lot of blood, sweat, and tears. A case study from Salon.com illustrates this concept well. Essentially, the webiste was able to increase traffic to the site by 40% by creating 33% less content. This supports the idea that content isn't a numbers game; it's a quality game.

Second, your content strategy should define accountabilities and create a workflow that implements a checks and balances system to ensure that you are creating epic content. If your content strategy is lacking, make sure you really understand how people are using the Internet and get the link builders involved with brainstorming, even if it's just to ask them. If you have minimal content building experience, it's important to have the people in the trenches involved in the discussion.

To make content creation even easier, I've created this checklist for what I believe all epic content should have. If you can't say "yes" or provide a compelling answer for each, you might need to go back to the drawing board. Print it out and put it next to your desk right now (high res version available up request). 

good content creation check list

Link Building Isn't Integrated with Other Marketing Channels

This section might be a bit misleading as link building can still be successful without being integrated into other channels. However, a lack of integration can be a serious glass roof on the ladder to link building awesomeness. There is only so much traditional link building can do. Big wins often encompass other divisions, such as PR, social media, the product team, and more. This is acknowledged well in Jon's link building strategy list - in the top filter notice the checkboxes under "Dependencies on Other Resources." The bigger your ideas, more departments will need to be involved. Without a seamless plan for integration and collaboration, working together is going to be one big mess (if it's even possible at all).

Besides being able to work harmoniously, another big reason you want integration is because you can capitalize on what everybody else is doing and make sure you capture all the wins possible from a particular campaign. A lot of the initiatives your PR team is running can be easily tweaked to fit into the SEO team's agenda as well. It's called "looking for low-hanging fruit", and it is impossible to implement this idea if you don't know what the other teams are doing.

How to Win:

Communicate, communicate, communicate. Especially at first, you are going to have to stay relevant by constantly communicating with the different marketing teams. I've found that taking the initiative and including these teams' interests in your link building initiatives shows them a clear example of how you can work together.

For example, if you are running contests with bloggers, looking out for the social media team's interests can help you make a case for why your teams should work together. It's the "I'll scratch your back if you scratch mine" philosophy, and you are initiating the "scratching". By laying out a work flow through example, you will inspire these teams to get you involved with their projects.

To do this, include them in every step from inception to execution and make it clear how you are addressing their goals. Ask questions and ask for input. Consider it internal egobait. Pretty soon, you'll have an open line of communication and your requests for regular cross-team meetings will be taken seriously. Before you know it, you will all be in the loop of what other teams are doing and collaborating on your different project calendars. Tread lightly so as not to step on any toes, and encourage hosting these calendars on a collaborative platform, such as a simple Google Doc. In the end, communication turns into collaboration, and that is where you will gain the most wins from your marketing efforts.

Link Building Team Members are Siloed

Just as marketing channels can be siloed, so can the different teams involved with link building. I mentioned above the different concentrations that should be represented in a complete link building team. Smaller teams tend to have no trouble including everyone in the strategy, as they all typically sit in the same room. But what if you have a large team? Maybe with offices in different locations?

It's easy to leave people out of the link building funnel; people figure the process will ship quicker if there are less chefs in the kitchen. However, this is the easiest way for a link building campaign to fail. Not every person on your team can be an expert in everything, so drawing from the experience and know-how that all team members have to offer will help you succeed.

How to Win:

Know each person(s) or teams core competencies. By knowing what each person/team can bring to the table, you'll be able to figure out where they fit into a particular link building campaign. The skills that each team member can bring to the table include:

  • Link builder - This person spends all day trolling the Internet and trying to promote content, dealing with rejections, and taking part in observational learning along the way. He/she can tell you if the idea is promotable, as well as insights into how to reach different target niches.
  • Content person - This person spends all day writing. He/she will know how to use the written word to represent the data on your infographic in a comprehensible way, while capturing your brand's voice and style to ensure consistency.
  • Creative person - This person knows how to represent complex data in a beautiful, visual way. He/she will be able to tell you possible roadblocks of the infographic idea from a design perspective, or suggest better ways to represent the information.
  • Researcher - This person crunches data all day. He/she will be able to collect credible sources for your piece, ensuring that the information is statistically sound and that your link builders don't get eaten alive by critics.
  • PR person - This person speaks to the media all day. He/she knows what journalists look for and will be able to tell you if your piece will be promotable to high-value publications.
  • Project manager - This person is the glue that holds the process together. He/she should be responsible for making sure the teams communicate and collaborate.
  • Social media person - This person knows what is trending in the social sphere. He/she can help promote the piece and tell you if the idea will be shared. He/she can help push your piece viral.

Without the help from all of these people, you are much more likely to create a piece that:

  • Doesn't target a specific audience.
  • Targets an audience that is difficult to infiltrate.
  • Targets an audience that is too small, making the likelihood of success small.
  • Isn't statistically sound, making it likely that it will be ripped apart during outreach.
  • Is visually limited because your design team was incapable of executing the grand vision.
  • Doesn't take off in the social space.

Ensure your teams work collaboratively and communicate to create an inherent checks and balances system for creating winning link building campaigns.

Relationships are Left Out

I'm a big proponent of link building being renamed relationship building. The lines between traditional PR and link building are being blurred, and to get a link you need to bring it back to basics: networking. People do things for people they know. Bloggers and journalists get solicited to build links all the time, and you need to make sure you are among the people they come to know if you want that link.

The "relationship" part is left out because link builders are constantly pressured by numbers. Those who aren't in the trenches don't understand how much goes into link building. I would argue that with some link building campaigns, the back and forth with a prospect takes up to 75% of the time. That number is often lost when looking at metrics like number of hours worked versus number of successful link placements.

How to Win:

First, educate your team and manage expectations. If you are the boss, understand that link building should take time. iAcquire wrote an article on the effort required to build links and I don't think it's far off.

As far as measurement, make sure that the time spent negotiating is taken into account. If you have a large team and sense a problem among your link builders of not knowing when to let go (which I think is a big beginner pitfall), sit down with them and role play. Have them fill out a time log to capture back and forth if you have to. Host a link building hack day and get in the trenches to see for yourself just how much back and forth you'll do. No matter the method, make sure that this is taken into account and encourage relationship building. It's what makes link building scalable — as you can go back to the same people and be introduced to new contacts — so don't give up. Pretty soon they'll get to a place where they can manage a relationship quicker and more efficiently.

Everyone Forgets the End Goal

Disclaimer: this is a #tellmehowyoureallyfeel moment and is my #1 gripe with link building. I think the term has been bastardized - it is so overused that people forget where it came from in the first place. It's not about the number of links. Link building was a means created to increase conversions. Conversions should be what you care about. Not the number of links. Not even how well your SERP positioning improves. If you are increasing the number of links, improving your SERP positioning, and seeing more traffic, absolutely NONE of this matters if that traffic isn't converting.

Because of this misconception, I think a lot of SEOs will say a big part of their job is educating their clients/bosses. It's quite easy to get caught up in the minutiae; counting the number of links and watching rank changes are easy to hold onto because they are the easiest to see. These are great short-term goals, but they are not the end goal.

My co-worker Carson Ward said this well:

carson ward pullquote on link building

How to Win:

Constantly remind yourself/your team of the end goal. Do this by measuring changes in conversions that are a result of the smaller wins. Especially while educating your clients/bosses, if they aren't constantly reminded of conversions, they will easily forget. This is where defining goals and managing expectations are super important.

Second, remember that link building — and SEO as a whole — is only part of the inbound marketing puzzle. The only reason people have an online business is to capture new customers on the web. SEO is only one way to do this, and link building is only one way SEO makes this happen. Know the big picture and understand how your efforts contribute to the grand vision.

In Summary: Checklist for a Winning Link Building Strategy

  Create separate (and seamless) link building and content strategies. Sprinkle in link bait.

  Don't forget the "strategy" part - you need a road map to be able to take the journey.

  Define both short and long-term goals.

  Implement long-term tracking metrics and processes.

  Work with urgency to reach those metrics.

  Manage everyone's expectations. Communicate frequently and document.

  Devote the appropriate amount of resources to execute the strategy.

  Create epic content.

  Ideally, integrate your link building strategy with other marketing channels.

  Don't silo your team members. Make sure they work collaboratively.

  Remember winning link building = relationship building. Don't forget this takes time.

  Don't forget the end goal of all link building: Increasing conversions, not # of links.


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Oren You A Cute One!

The White House

Your Daily Snapshot for
Monday, July 16, 2012

 

Photo of the Day: Oren You A Cute One!

Photo of the Day

President Barack Obama blows a kiss to Oren Baer, son of Ken Baer, the departing Associate Director for Communications and Strategic Planning at OMB, during a visit to the Oval Office, July 12, 2012. Baer's daughter, Avital, and wife, Caron Gremont, watch at left. (Official White House Photo by Lawrence Jackson)

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9:30 AM: The President departs the White House en route Joint Base Andrews

9:45 AM: The President departs Joint Base Andrews en route Cincinnati, Ohio

11:15 AM: The President arrives in Ohio

11:45 PM: The Vice President delivers remarks at a White House Community Leaders Briefing on Seniors Issues WhiteHouse.gov/live

12:30 PM: The President attends a campaign event

2:20 PM: The President delivers remarks at a campaign event

4:45 PM: The President departs Ohio en route Joint Base Andrews

6:10 PM: The President arrives Joint Base Andrews

6:25 PM: The President arrives the White House

7:10 PM: The President attends the United States vs. Brazil women and men’s basketball games

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