Certain trends become clear each quarter when you listen to companies' conference calls. This quarter the clearest trend in the Internet sector has been the focus on quality of traffic. The Spitzer case against Intermix spotlighted the amount of traffic generated through spyware and adware; but it's clear that low-quality (and sometimes illegal) traffic is also delivered and monetized via second-tier search engines and marketing affilates. As a result, a number of companies have mentioned that they are eliminating low-quality traffic sources and trying to increase traffic from the top tier search engines. This is a crucial issue for the entire Internet sector, particularly for search and affiliate marketing firms, and is probably under-appreciated by investors. Excerpts from Autobytel (ticker: ABTL) CEO Rick Post from his Q2 call:
...We believe quality is vital to our ability to reduce dealer attrition and increase our ability to sell additional products and services to our dealer customers. During the second quarter, we re-evaluated our quality verification system in our affiliate relationships. We made a conscience effort to increase the quality of our leads. We believe that our efforts are beginning to pay off. New car purchase closing ratios for Autobytel retail dealers, as measured by our new car customer surveys, are increasing. […closing ratio is the number of vehicles purchased at a dealer generated from …the total purchase requests sent to that dealer.]
We are focusing on our search engine optimization initiatives, which has resulted in millions of indexed Autobytel pages at major search engines like Google, drawing the high quality purchase requests for our dealers. We continue to develop co-branding and marketing relationships with the top tier destinations on the web, including AOL, Yahoo, and our recently-announced relationships with Bankrate, ESPN.com and Viacom... We're also pleased with the growth of our Spanish language properties. Going forward, we will actively seek out relationships that will align Autobytel with quality partners that are likely to attract consumers with our target demographics.
(Quotes are from the CCBN StreetEvents transcript.)