Understanding Paid Search Advertising

Words To The Wise™ by Marketingsage Staff

Paid search advertising, with it's pay per click pricing, has become a standard promotional tool for most marketers because you only pay when you get a result.Paid search advertising is advertising that shows up with online search results. Almost all search engines such as Google, Yahoo, MSN, AOL and the like, allow you to deliver a keyword triggered advertisement. The advertiser bids for placement with selected keywords. The higher your bid, the higher your placement on the search result page.

Generally, paid search advertisements are:

  • Usually text based. The advertiser is allowed a limited number of characters for a headline and the body of the advert. There is usually a display URL and a hidden URL. The hidden URL is typically one of those long convoluted URLs that allow the advertiser to track clicks.
  • Pre-approved by a human. Although the advertiser sets up the advert online these adverts are usually reviewed by a human before going live. The human is making sure the adverts are appropriate.
  • Trackable. The search engine company will allow you to run reports on your advertisements so you can see how each advert is performing. You can review the number of clicks, the cost per click and in come cases, the return on investment (ROI).

Paid search advertising— Pros:

  1. Pay for performance. With paid search advertising you only pay when you get a referral (a click). With other adverts, such as print, you pay for the space or time regardless of results.
     
  2. Interested respondents. Because your advert is shown when someone is actively searching for something, the respondents are usually interested in learning or purchasing.
     
  3. Low cost of entry. Many search engines have no minimum purchase amount. Those that do have a minimum, set the bar relatively low. This means paid search can fit any budget. In comparison, print adverts have a relatively high cost of entry because there is a minimum circulation cost to cover and you usually need to produce art work.
     
  4. Easy to track and optimize. The huge benefit of any pat per click advertising is your ability to track results in almost real-time. This means you can optimize your campaign in almost real-time. With print or broadcast campaigns you often have to advertise for many months to learn anything about the effectiveness of the campaign.
     
  5. Fast placements. Unlike print or broadcast adverts that must be scheduled, you can place (or cancel) a paid search advert in almost real time.
     
  6. Controlled placements. Many search engine advertising programs allow you to some control over the placement of your adverts. You can decide not to place your advert with some keywords, you can control the timing of your adverts and the geography in which they appear.
     
  7. Free impressions. With paid search advertising your advert will show when someone searches for your keywords. However, you only pay for the advert if that person clicks on your advert. These impressions can play a small part in your branding efforts.
     
  8. No artwork required. Because most adverts are text-based you do not need to invest in graphic art.
     
  9. Easy to fund. Adverts are usually funded by credit card. You typically auto-pay or pre-pay. You can usually set a maximum budget and a maximum cost per click for your various adverts.

Paid search advertising — Cons

  1. Can be very expensive. While it's true that you can set maximum budgets there are many factors that make paid search advertising very expensive for some:

     

     

    • Not every click will generate a desirable result. You may pay for thousands of clicks that do not result in either leads or sales. This means the cost per lead and cost per sale can be high, even though your cost per click is low.
       
    • Runaway costs. Occasionally you can get a surge of clicks that unexpectedly runs up your costs without producing equivalent results. If you allow the system to auto-bid for your advert placements, the sudden entry of a competitor could push your costs up dramatically.
       
  2. Time consuming to manage. The fact that you can easily run lots of adverts and optimize each one using result data is wonderful. However, managing all those adverts takes time, effort and skill. It's very easy to neglect the management process. You'll likely find a tradeoff between your adverting costs and time costs.
     
  3. No residuals. A paid search advert disappears once you stop paying for it. A print advert in a magazine could be read anytime the magazine is read. Some publications, such as directories, have a long life and are passed along to other readers.
     
  4. Limited scope for introducing new concepts. Paid search adverts are triggered by some searching for something. This means the searcher must already have something in mind. If your concept is new or without established keywords, paid search adverts may not be as effective as other promotions for the purpose of educating your audience.
     
  5. Limited scope for image building. Because most paid search adverts only allow short text-based creative such adverts have can't build an image in the same way as you can with pictures.

What you should know about paid search advertising

  • Search Engines. Believe it or not, Google is not the only search engine out there. The fact that it is the biggest and most often thought of can mean you face more competition when bidding for keywords. Therefore, your ROI may be higher from other search engines.
     
  • Keywords. You'll know the keywords most associated with your product. However, you really cannot know, without using tools, all the variations that are used when people search. The obvious keywords can be expensive because everyone bids on them. Less obvious words, even obscure words, can generate the best ROI even though the keyword click volume may be lower.
     
  • Advert copy. It's tempting to write your advertising copy to have the broadest appeal. However, you need to be careful not to attract too many clicks from people who cannot purchase from you or your ROI will be greatly diminished. Remember to try different adverts, not only to see what works best, but also to appeal to different audiences.
     
  • Landing pages. When someone clicks and gets to your web site landing page, that landing page must instantly address their needs. If it does not, they'll move on and you will have paid for a click that has no value to you. Landing pages need to be managed and optimized along with the advertisements that lead to them.
     
  • Click fraud. There has been a dramatic rise in click fraud over the years. This is when someone clicks on your advertisement multiple times to run up your costs. Most search engines can recognize when someone is doing this and therefore they will only charge for one click per IP address in a 24 hour period. Those policies help, but do not eliminate click fraud.

In-house vs. contracted paid search advertising management

If you've never managed paid search or pay per click (PPC) advertising yourself, you should try it before you even think of outsourcing it or handing the responsibility to a subordinate. First of all you'll get to set up the necessary accounts and establish the notification emails, reports and funding protocols. You'll always want to control these elements.

Secondly, you'll establish a ROI expectation based on your own efforts. Additionally, you learn how time consuming managing PPC advertising really is over the course of several months. The cost of the clicks, the management time and your results in sales leads or sales will allow you to make an informed decision about having someone else do it. It also gives you a measure of success if you do give the responsibility to someone else.

Because results can be so measurable, the decision to contract out this task is usually easy — especially if you are comfortable contracting harder to measure services such as PR. Your PPC advertising should always be managed alongside your other promotions and not outsourced to a firm that only does PPC. The reasons are straight forward if you are concerned about your overall return on your marketing investment. You'll want your paid search management firm to recommend the right advertisements, not just PPC, advertisements based on potential ROI. At times, PPC may not be the best choice. At Marketingsage, we frequently advise clients to decrease their PPC budgets when a better ROI can be achieved by other programs or when PPC costs rise to certain levels and we believe they will fall again. By moving resources to what works best at any given time, Marketingsage delivers a superior ROI to its clients.

Additionally, managing any marketing program requires learning about your company, products and sales process. If you use multiple agencies, you pay for this learning multiple times and you bear the increased cost of managing and coordinating all concerned.

About Marketingsage

Marketingsage is a full service marketing firm that helps other marketers and business executives increase revenue by cost-effectively generating sales leads, building brands, launching products and developing sales channels. With Marketingsage you can add expertise, bandwidth, specialized tools and contacts when you need them, for as long as you need them.

If you think Marketingsage may be able to help you and your business, please give us a call at 925-426-0488 or click here to have us contact you.

 

Paid search advertising is a staple of most marketing programs. In most cases, Marketingsage recommends some investment in this area.
What do other marketers think? Here are some reported numbers on favorite online advertising tactics:


In this survey, paid search advertising fell sharply from 49% in 2006 to 34% in 2007 reflecting higher keyword prices and lower ROI.

Source: Annual Tech Survey by Marketing Sherpa (12/07)