- What is paid search advertising?
- What is Pay Per Click advertising?
- How does paid search differ from natural search?
- Isn’t paid search expensive?
- Should I start with paid search or natural search?
- Why shouldn’t my company manage paid search internally?
- How long does it take to launch aid search accounts?
- How long will it take to receive results?
- How many keywords can I bid on?
- What about click fraud?
- How do you track the results?
- What about the tracking systems built into Google AdWords and Yahoo Search Marketing?
- What is a bid limit?
- How do you calculate bid limits?
- Do you use broad match or narrow match?
- What is click fraud and how concerned should we be about it?
Paid search, often known as Pay Per Click (PPC), is a form of advertising offered by the various Internet search engines. Advertisements are attached to particular keywords (or key phrases), and shown only when someone searches on that keyword. The major paid search providers are Google, Yahoo and MSN Search.
Most advertising is purchased on a cost per impression basis. This means that the advertiser pays whenever someone sees the advertisement. Pay Per Click is purchased on a cost per click basis.
The advertiser only pays when someone actually clicks on the advertisement. Most paid search advertising is handled on a Pay Per Click basis.
The primary differences are:
- Paid search can be launched quickly. Natural search generally takes months to show a return.
- Paid search focuses on a large number of keywords. Natural search needs to be focused on a few high-return keywords.
- Paid search is highly measurable. Tracking results on natural search is more difficult (although not impossible).
Poorly managed, paid search can be very expensive. Properly managed, it can be a goldmine. Most critical is that the results are carefully tracked, and that the data received from tracking is used to optimize the advertising.
We strongly recommend that you start with paid search. This allows you to test a large number of keywords, and to measure the results on a keyword by keyword basis. This information can then
be used to target effective, high-impact keywords for your natural search efforts.
Unfortunately, much of our industry doesn’t agree. They tend to focus on untested, often ineffective keywords. This may be due to the fact that natural search services tend to be more profitable than paid search services, as most of the money in paid search goes to Google and Yahoo.
In our view, the only legitimate reason a business should focus on Natural Search before proving out keywords on Paid Search is that the company is in an industry niche that is not hypercompetitive and has fairly obvious primary keywords with significant search volume.
In many cases, managing paid search internally is the best way to go, and we’ve told many prospective clients this. You should consider outsourcing the management of paid search when one or more of the following are true:
- You expect the monthly media cost to be in the thousands of dollars or higher.
- Your product or service is available in a sufficiently large geographic area.
- You have hundreds or thousands of potential keywords.
- You have tried paid search and couldn’t make it profitable.
Once all paperwork is in place, we can usually launch paid search advertising within three weeks.
Once the accounts are created and activated, traffic should be received by the website within hours, if not minutes. Generally, traffic will ramp up over the first few days of the campaign.
We will advertise on as many keywords as are necessary to adequately cover your particular marketspace. We would generally prefer to have too many keywords, rather than too few.
Click fraud is a legitimate problem with paid search advertising. The major paid search engines have technologies in place to prevent click fraud, but they do not always work. We closely monitor our paid search accounts for suspicious behavior. This often results in a credit being made to the account by the search engine.
Most notably, we track results beyond the click. An increase in website “visibility” doesn’t pay the bills.
The first step is to determine what is being measured on the site. In most cases, a site is either attempting to sell directly, or to generate leads for an offline sales team to work. We refer to these actions as online “transactions.”
Once the transactions have been defined, there are a number of third-party technologies that allow one to connect such transactions with their original source. The amount of information given is quite limited, and there is no way to ensure that transactions are not being counted multiple times.
We are not big fans of the tracking that Google and Yahoo offer, although we have used them on occasion. The amount of information given is quite limited, and there is no way to ensure that transactions are not being counted multiple times.
A bid limit is the maximum you can spend per click for a particular keyword. While receiving clicks for less than the bid limit increases profitability and is very much welcome, it is extremely important to have an upper boundary.
The formula for calculating bid limits is as follows:
Transaction Value x Conversion Rate x Advertising Percentage
Transaction Value represents the value of the online transaction. For instance, if you are selling widgets for $100, and your cost of goods is $60, the value of a transaction is $40. If the site is collecting leads, you need to determine what a lead is worth.
Conversion Rate is the percentage of website visitors that submit a transaction. If 200 people come in on a particular keyword, and ten of them submit lead forms, the conversion rate is 5%.
Advertising Percentage is a strategic decision as to how much of the value generated by a transaction should be allocated towards discretionary advertising spend.
As an example, let’s say you have a transaction that you determine to be worth $100. For a particular keyword, the conversion rate is 4%. You’re looking to grow as quickly as possible, so you set the advertising percentage as 50%.
The formula would be:
$100 x 4% x 50%
For a bid limit of $2.00 per click.
Bid limits should be calculated on a keyword by keyword basis, as the conversion rate (and sometimes the transaction value) can vary greatly from one keyword to the next.
Our inclinations are towards narrow match and a large selection of keywords. Many people recommend broad match as it results in few keywords to manage, but we feel this results in large amounts of untargeted traffic.
Click fraud is the act of sending fraudulent clicks to PPC advertisers. The clicks can either be generated by automated technology or via actual manual clicking on advertisements.
The goal is either to generate revenue for affiliates or to increase the costs of a competitor.
Click fraud is certainly a problem, but the degree of problem is difficult to determine, as the search engines have not been forthcoming with real data. Given that they make money from click fraud, this is unacceptable and will likely be remedied in the courts (the lack of data, that is).
To their credit, the major search engines seem to be working hard to fight click fraud. We’ve seen them issue refunds to our clients before we were even able to ask.
Third party fraud detection tools can also help. When shown evidence of click fraud, the search engines generally will issue a refund.
In the meantime, it’s something of a cost of business in the paid search game. One should certainly keep an eye out for suspicious behavior, but realize that all one can do is lower it, not remove it entirely.