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Amazon is reviewing whether it should buy exclusive rights to advertise on

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MKT 301 Fall 2004 Amazon is reviewing whether it should buy exclusive rights to advertise on the front page of a social network search engine, Zignet. At the launch of the agreement, Amazon is expected to make an upfront payment of $15 million to Zignet. In addition, Amazon would spend an average of $15,000 per day on Zignet advertising for a full year. In return, Amazon’s brand would be featured exclusively and prominently on many of Zignet’s pages for one year. More specifically, Amazon expects to be present on 60% of Zignet’s 50 million pageviews per day. Based on industry estimates, Amazon believes that 0.25% of every pageview at Zignet would result in a visit to its own website for the entire year of this deal. Amazon’s own experience suggests that about 1.0% of the visitors to its site actually buy books and other merchandise. While the typical retention rate for Amazon customers is over 90%, management is concerned that customers coming from the Zignet site will have a retention rate of only 70%. The dollar amount of a typical order is $100. Amazon’s CFO was concerned that, with a 30% gross margin per order and 10% cost of capital, this deal may not be worthwhile. What is your recommendation? Assume customers acquired at the end of the year are worth the same as those acquired at the beginning of the year.

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NEED FOR INVESTING IN SEO (SEARCH ENGINE OPTIMIZATION)




NEED FOR INVESTING IN SEO (SEARCH ENGINE OPTIMIZATION)

NAME OF STUDENT

NAME OF SCHOOL

COURSE

SUBMITTED TO

DATE

, NEED FOR INVESTING IN SEO (SEARCH ENGINE OPTIMIZATION)




I am of the opinion that Amazon should buy the exclusive rights to advertise on the front page of

Zignet as per the plan. This is because of the way this would have a long term advantage to not

only the face of the company but for future transactions. “Online advertising market is becoming

a popular area of academic research. Among other types of advertising, search engine advertising

is leading the growth in terms of revenue. In general, there are two types of search engine

advertising: paid placement and search engine optimization (SEO)”.( Xing, B., & Lin, Z. (2006,

August).


There are very reasons why any business, not just Amazon should make a consideration of

investing in organic SEO. First of all , SEOs have remained useful till now , for very many

companies because the techniques remain sound ,despite of the fact that most organic traffic

from Google was recently pulled off .SEOs work best as long as the company is focusing on

optimal user experience while performing methodic SEO strategies .


Another reason why many businesses need investing in SEOs despite the high costs is because,

search engine optimization is not going to stop any time soon based on the track the SEOs appear

to be developing and evolving. There are no soon signs of it not likely to cease anytime soon.

Hence investing in this is not just a short term project, but it may still be for a very long time and

that will be an advantage to the company then.


The other major reason why I am of the opinion that Amazon should stick to their plan is that,

the cost of buying SEOs is way relatively cheaper than other forms of online marketing e.g. PPc

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