There’s some serious cash spent when it comes to search engine advertising. Just ask Patrick Norman, co-founder and vice president of Bomgar.
Norman says pay-per-click advertising was the breakthrough tactic that spurred the growth of the remote-support solutions provider in Ridgeland, Miss., that previously relied on the CEO’s personal debit card as its only funding source.
Over four years, Bomgar gained 2,500 customers in 30 countries, which the company attributes to Web-based acquisition via pay-per-click (PPC). Bomgar still spends a great deal on search-engine marketing (SEM), to the tune of about $90,000 per month. “Not less than 40 percent of our leads come through SEM, and we consistently see a 3-to-1 return on the dollars we spend on PPC advertising,” Norman says.
Big numbers indeed, with big returns. But heed the warning of Karen Jensen, director of electronic business at Printronix of Irvine, Calif. “Don’t jump in, wade in slowly,” she says. “Because if you don’t understand how much it can cost you and how to set the limits, you can waste a whole lot of money really fast.”
Such a disparity of results is possible with any new marketing tactic, but the wild successes and stinging failures of pay-per-click advertising deserve special attention. The contextual advertising that emerged a few years ago has quickly become an essential part of online marketing programs. The explosive growth in PPC has driven online advertising estimates up to the $80 billion mark by 2011, according to analysts at Piper Jaffray. This lead-generation technique requires new media methods and strict cost controls, lest a mob of well-intentioned Web browsers click you into bankruptcy.
There are many dimensions of pay-per-click advertising that break the mold of traditional advertising. For starters, the range of the PPC network is vast, including major search engines such as Google and Yahoo and a broad network of sites that have embedded these engine’s ads. The “Ads by Google” banners are the most common example.
Before PPC, how many advertisers could say, “I want to show my ad only to someone interested in stainless steel bowling balls?” Not many. Enter pay-per-click.
“In traditional advertising, you put out a banner ad or a billboard and hope that they will buy,” says John W. Ellis, senior online marketing manager with ResortQuest International of Fort Walton Beach, Fla. “There’s no knowledge about what is effective.
“That’s the power of online. You don’t have to guess online. There is still a place for offline marketing. People still want to see a brochure or pick up the phone to place an order and talk to someone about the vacation condo and what it looks like — things you cannot do online.”
The billing and metrics available through PPC are precise. Billing is based on actions, not impressions. You pay only when a visitor clicks your ad and visits your site. The wide range of available metrics also allows better tracking of resources spent. For example, a manager can track the cost per lead of a specific ad among visitors from a specific region who searched on a specific search phrase and also see how long the lead spent on the destination site.
Crawl, Walk, Run
The first step on the road to ruin is to jump in aggressively without doing any campaign planning. Plan to ratchet up slowly as you get your feet wet. It’s easy to adjust your budget — you can switch from $10 per day to $10,000 with just a few clicks. By starting small, you will know what is working (or not working) with a minimal investment. Jensen says her team continually tweaks its campaign to get the best results.
Although starting small is good, be sure you get an adequate sample size before making any decisions. PPC is well suited to testing methods such as A/B testing and multivariate testing. “We have learned to spread the dollars across several key words or phrases to test out which ones are most effective,” Norman says.
A Word on Keywords
Perhaps the most significant element to test is the keywords you are targeting. Unlike traditional banner ads, PPC ads appear only on search engine results pages when your targeted terms are searched. The effectiveness of the campaign will depend largely on the quality of your keyword research.
One problem marketers face is that the jargon used by industry insiders and analysts is far removed from the vocabulary of most customers. So your product manager might suggest “unified messaging solution” as a great search phrase, but you may get more traffic from “affordable phone system.”
Norman says that accurate keyword targeting is key to Bomgar’s PPC success. “We were effective in our ability to optimize PPC ads because we got on a psychological level and essentially approached the marketing process from reverse to reach customers via the key search terms they were already using,” he says. “It’s important to get inside their heads — know what they think of when they think of your product.”
Watching your competitors’ activity can be helpful, too. Make note of the keywords they target and investigate the pricing of these opportunities. But because of the dynamic bidding system for PPC advertising, it’s important to have an understanding of what constitutes good value. “In everybody’s business, there are keywords that cost a lot of money, and we stay away from those keywords wherever possible,” Printronix’s Jensen says. Her team learned this lesson early on through a campaign that brought a lot of traffic but few leads.
Although generating online traffic helps, it’s conversions that count. And online marketers say it’s difficult to differentiate traffic resulting from other marketing efforts, such as direct mail, from traffic generated by search engine advertising. “It’s a numbers game,” says Jensen. “Over one quarter or a six-month period, look at the traffic differential and leads received and normalize it. If I’m getting ‘X’ amount every month, and then I see spikes, then I can attribute those spikes to the campaigns.”
ResortQuest International’s Ellis says conversion rates are a critical metric to track. “We do not necessarily stay away from words that are expensive,” he explains. “We stay away from words that don’t convert. In other words, it’s OK to spend big dollars, if their return is there. This is why daily monitoring is mandatory.”
PPC systems such as Google AdWords work on competitive bidding. Short, highly targeted search phrases such as “business intelligence” can therefore cost you upward of $15 per click. Consider moving downstream to longer search phrases where bidding is less intense. By combining a broad pool of low-traffic terms, such as “business intelligence software provider” or “business intelligence software comparison,” you’ll derive better value from your investment.
System for Success
There are additional steps you can take to improve the effectiveness of your campaign. It’s important to consider the entire purchase cycle for your target audience. Getting their interest through a search engine advertisement is a good first step, but what do you have waiting for them on the landing page to meet their unique information needs? Too many pay-per-click ads still dump all users to the home page, missing an opportunity to send visitors deep within the site to the closest matches to their specific search phrases.
Well-targeted landing pages will help increase the chances that the visitor will become a customer. With specific landing pages in place, you can then test the page elements to see which versions result in the best metrics. Cost-per-conversion is the golden metric for pay-per-click advertising, enabling you to measure the effectiveness of the campaign and to establish a precise return on investment for your budget.
Like no other form of advertising, PPC requires a collaborative effort from different departments. At Bomgar, three groups are involved: content writers who research relevant words to include in ads, ad managers who oversee the performance of PPC bids and developers who implement technical details such as tracking codes. Few activities are more likely to bring IT and marketing departments closer together, merging marketing’s skills on customer segmentation and messaging with IT’s understanding of reporting tools and Web technologies.
When these groups work together, the payoff is highly qualified pay-per-click traffic, funneled into an effective conversion process on the site, leading to low-cost business leads or online sales. But this collaboration likely won’t come naturally. As Jensen explains, it may take some education first. She has found the most effective method of getting her product managers on board is to educate with real examples by running a test campaign for a week or two.
“By taking them through several of these campaigns, they start to get it,” Jensen says. “We show them the data behind it, and they say, ‘Ohhh.’ The light bulb starts to flicker at that point.”
By John W. Ellis
1 Separate content from search.
Online marketers need to view their contextual listings campaigns differently from search because the results and the customers differ. Expect lower click and conversion rates, although this does not necessarily mean an advertiser should opt out of content buys. Leave that decision up to the statistics and what is working — and, more important, what is not working.
2 Control spending by adjusting bid amounts, not daily spend budgets.
Often, the funds are simply not available to meet the demand. Yet, if a campaign is optimized correctly, then the return should justify any spend. Advertisers need to lower the bidding cost to reach the maximum number of target customers. Controlling spending based on daily budget leaves too many customers untapped.
3 Create a negative keyword list.
Eliminating unwanted traffic is an easy step to lower cost and improve conversion. All of the major pay-per-click providers let advertisers create lists of negative keywords. Although this results in less traffic, the eliminated traffic was unwanted (nonbuyers).
An example of how negative keywords work would be a site selling soap. The list of negative words might include opera and digest. If the consumer searches for “soap opera” or “soap digest,” the advertiser would not want to pay for that visit.
4 Conversion matters, not click-through rate.
It’s easy to get traffic. Persuading that traffic to make purchases is another story. By using all of the other habits listed, a pay-per-click advertiser can weed out unwanted traffic and pay only for conversions. It is important to keep an eye on the cost per conversion. How much does a customer — not a click — cost?
5 Avoid the top spot.
The number-one position usually leads to a poor return on investment, and that can often be true of the second and third positions as well. The traffic coming from the top positions are not buyers; they are just researchers. Serious buyers will go to the third, fourth and fifth positions. When consumers are ready to buy, they will come back.
6 Bid exact, avoid broad.
By using exact matching, an advertiser eliminates researchers and goes straight to buyers. As with many of these habits, the traffic will decrease, but conversion and online revenue should increase. Consider doubling or tripling the keywords by creating broad, exact and phrase matches for every keyword. Then, after reviewing the analytics, gradually eliminate broad and phrase matches that result in lower conversion rates.
7 Get good analytics.
A reliable analytics program is the backbone of any online (and often offline) marketing campaign. Determining the cost per conversion, unwanted visitors, negative keyword list and return on investment — all require dependable analytics.
John W. Ellis is a senior online marketing manager for ResortQuest International. Ellis blogs about search engine advertising at www.johnwellis.com.