E-commerce Insights: Winning at Paid Search ’07

For many catalogers, paid search will be the single most important channel for new customer acquisition this year. Here are what I believe to be the 12 best ways to do it.

1. Focus on Google. The reality is, Google controls more than two-thirds of the search market and is growing rapidly. Yahoo! continues to lose market share each quarter. MSN is a far distant third. Ask.com is even further back.

Allocate your attention proportional to your ad spend. Don’t completely ignore Yahoo! or MSN, but invest the most love and attention in your Google campaigns. You’ll be rewarded with the largest return for your time.

2. Grow your term list. As a rule of thumb, test three to 10 times as many distinct keywords as there are pages on your site. For example, if you carry, say, 5,000 SKUs, test between 15,000 and 50,000 terms. Assign tracking codes to gauge sales and costs at the keyword level.

3. Make your landing pages relevant. Don’t send paid search visitors to the homepage. Instead, deep link them to the most relevant selling page on your site. If you have more than one candidate for a relevant landing page, assign tracking codes and test all options.

4. Split out branded from nonbranded terms. Many catalogers find that a large portion of their pay-per-click traffic and sales come from searches on their brand. Advertising on your brand makes sense; the cost is low and the sales are high. Do it, but realize that traffic on your brand name isn’t incremental. These are searchers who are looking for you due to your reputation and other marketing efforts.

Don’t allow your agency or your in-house team to use your brand portfolio to hide a poorly performing nonbrand portfolio. Separate the portfolios in all your reports. Charge your search team to grow nonbrand portfolio sales aggressively and profitability.

Optimize Performance Metrics

5. Use a strong bid management technology. If you’re spending more than $5,000 a month on paid search clicks, you’ll benefit from a bid management tool.

Seek a tool that:
• optimizes your selected performance metric across your keyword portfolio;
• operates at the keyword level, as opposed to AdGroup level; and
• sets bids based on economics, not by simple position.

Also, look for a flexible tool that allows you to specify different metrics or different targets for different types of terms. Avoid optimization algorithms that are “black boxes.” A tool should be reasonably transparent. It should provide a sensible rationale for each bid.

6. Track paid search into your call center. Some catalogers have begun to display a visible Web source code on the bottom of each Web page. This code indicates which tracked link drives the click that initiated the current session. I think this is a brilliant innovation.

With such a code, when a caller tells your customer service rep (CSR), “I found you on the Web,” the agent can ask the customer to scroll to the very bottom of the page and read off the letter code in the brackets. The CSR then punches this Web source code into your order management system as if it were a catalog source code. This powerful idea allows you to track the spillover from paid search into your call center.

Guard Your Program Against Outside Forces

7. Bid by margin. If your products have considerably different margin structures, fold these variances into your bidding logic. Do this at the category level or preferably at the keyword level. Compute margin based on the actual products ordered, not on the terms advertised, as certain ads will generate significant orders for products beyond the one advertised.

8. Use contextual advertising with caution. Contextual advertising (AdSense, Yahoo! Publisher Network, etc.) performs poorly for many catalogers. First, these potential customers are viewers, not searchers, and therefore are less qualified prospects. Second, an overwhelming majority of click fraud occurs on the content networks.

Generally, less sophisticated search marketers should avoid advertising on the content networks. If you do so, separate the tracking of these ads from the reset of your search marketing campaign so you can monitor them carefully. There are quality clicks at reasonable prices to be found in the content networks, but it takes expertise to find these needles inside the haystack.

9. Scrutinize your affiliate program. Many catalogers drive up their paid search costs by mismanaging their affiliates. Analyze where your affiliates get their traffic. Don’t allow affiliates to advertise on your brand name. And by all means, don’t provide affiliates with better offers than those on your site.

10. Manage your agency. If you use a search agency to manage your paid search campaigns, consider the following:
• a large fraction of your sales will be driven by your brand name;
• these terms typically have low cost; and
• your agency played no role in brand reputation.

Then consider compensating your paid search marketing agency as a percentage of ad spend, as opposed to a percentage of sales.

Establish clear return on investment metrics. Ensure your contract has an easy out (30 days or less) if performance or service targets aren’t met. Negotiate a maximum monthly dollar cap on your agency fee to protect you from soaring bills in your heaviest traffic months.

11. Audit your search programs every six months. Compare the costs shown in your search reports with the actual invoices from the engines. Compare the sales reported in your search reports with order detail records. Determine whether any orders are counted twice due to different cookie tracking.

Analyze keyword-level efficiency by computing the ratio of cost to sales by keyword. Sort this list by descending ad cost to ensure your most expensive terms are pulling their weight. Analyze product-category-level efficiency, folding in your category margin data to ensure your campaigns are generating profit, not just sales.

12. Obsess about conversion. In the long run, the marketers with the best site conversion can afford to pay the most for paid search traffic, allowing them to grab the largest share of available inventory. The ultimate winners in search are the sites with the highest conversion, as measured by margin dollars per visit.

Conclusion

Winning at paid search in 2007 will require more expertise than in 2006. Catalogers will face more competition, more sophisticated competition and higher average click costs. Take care that your paid search program continues to be an effective marketing channel.

Alan Rimm-Kaufman is president and founder of the Rimm-Kaufman Group, a search marketing agency. Visit his blog at rimmkaufman.com/rkgblog.