How Hard Should You Press The Gas Pedal In #Paid #Search?

The following post contains a number of metaphors strained to the breaking point; viewer discretion is advised.

An enduring truth in the paid search business is that paid search managers and marketing teams spend far more time thinking about tactical minutia than they do thinking about what are far and away the most important questions to the business:

“What is the ultimate objective of paid search for our company? And how do we measure success against that goal?”

If the goals and measurement have been thoroughly fleshed out, considered and analyzed, then it makes sense that attention be focused on the “how to” questions — but often, it seems that applying scrutiny to the goals themselves leads to changed success metrics that have far more impact on performance than any number of geeky tactical maneuvers.

Every company can articulate their goals, but sometimes scratching deeper reveals shaky rationale supporting them.

For companies that budget search spend, marketers need to ask:

• “Who determines the budget and what criteria do they use?”
• “Are these criteria the same or different than those used to determine the budgets of other marketing programs online and off?”
• “At that budget, do you expect a profitable ROI? Breakeven? Investment for long term growth? Brand exposure?”
• “Does the budget rise and fall with market opportunity or is it rigid quarter-to-quarter?”
• “How do you measure and think about the “R” in ROI?”

For companies that set efficiency targets for non-brand search and allow the advertising spend to rise and fall with opportunity, a different set of questions should follow:

• “Great! What’s the basis of that ROI constraint?”
• “How does that ROI relate to business profits? Screamingly profitable? Breakeven? Investment?”
• “How does the marginal ROI compare to your average ROI?”
• “Does your “R” factor in all relevant success metrics like cross-device, offline spillover, registries, email sign ups, catalog requests, etc.?”
• “Over what time frame do you think about getting the return: the first interaction with a customer, or is some notion of lifetime-value folded in?”

Much of this boils down to how aggressively a company can drive marketing without wrecking.
Google recently launched an initiative to help advertisers think more carefully about performance marketing objectives and asked me to do some evangelizing with them.

Maximizing Profit Vs. ROI

 Nicholas says that “the best way to increase profits from your digital marketing investments is to make profits your main KPI. It seems self-evident, but very few advertisers are actually doing this.”
His point is that too often companies take as their goal maximizing ROI — a ratio — rather than maximizing profit — which is what you put in the bank at the end of the month. Increasing bids may decrease ROI as a ratio, but may drive enough additional volume to more than make up the difference.

He is right, of course. Picking only the lowest hanging fruit yields great per-piece profitability, but not much total profit. If the goal is profit maximization, then the proper approach is to first pick the lowest hanging fruit (of course) but to also pick the fruit higher up the tree as long as the value of the fruit picked is greater than the time/cost of picking it.

Let’s look at the math of diminishing marginal returns and we’ll see this clearly. As spend levels increase, efficiency inevitably decreases because we buy wisely, grabbing the most efficient opportunities first leaving less-efficient opportunities left over to choose next.

Threshold 1 on the graph represents Observed ROI Maximization. Threshold 2 represents Observed Profitability Maximization. Threshold 3 represents Return Maximization at Breakeven Profits, and Threshold 4 Represents Return Maximization at Some Investment.

Putting The Pedal To The Metal

To switch metaphors, just for fun, Nicholas sees some advertisers putting the car in drive but hardly putting any pressure on the gas pedal. They’re content to idle forward and “save money” on gas, but they don’t see the opportunity-loss associated with going so slowly.

He advocates for moving from 1 to 2:

Moving from ROI ratio maximization to short term profit maximization is an unmistakable, indeed unquestionable win.

However, many advertisers already go well beyond that. Most of our clients spend at least to observed breakeven (position 3 on the graph) on non-brand search.

The marginal ROI (slope) is negative moving from 2 to 3, but the loss is justified on the grounds that the portfolio comes in at breakeven. This allows the company to generate the maximum observed return from search at a breakeven investment overall.

But how do marketers justify going beyond position 3? At that point, not only is each conversion coming at a loss on the margin, but the collective whole is underwater, as well.

How can that ever make sense? To many smart marketers it does, and the reasons for that perspective involve some combination of the following arguments:

• We don’t see all the conversions driven by paid search. There are cross-device effects, there is spillover to brick and mortar, people drop cookies reducing the observable conversions. Factoring in this hidden value makes the additional investment wise.
• The graph above only accounts for short-term ROI. The lifetime value of the consumers engaged is more than enough to justify additional investment.
• Growing the customer base is valuable in and of itself. It leads to more customers to market to via email, direct mail, re-marketing display ads, social media, etc. This increases the natural lifetime value of a customer.
• Growth gives additional clout with vendors. Volume discounts and co-op marketing dollars go to the companies that sell more product. Publishers can charge more for advertising on site. Insurance companies can spread risk over a larger base. Bigger is better.
• Broader awareness creates more buzz, more PR, more word-of-mouth marketing, more in-bound links and social mentions. One of the most under-appreciated components of customer lifetime value is the propensity of happy customers to spread the word to their friends, which is vastly more powerful given the connective tissue of social media, Pinterest boards, etc.
• There is brand value to prominence on the SERP, and visits to website and apps. Engagement and awareness has value even if hard to measure.
• The media buyers get to spend like drunken sailors, I should be able to, as well!

Okay, I haven’t heard anyone use the last argument explicitly, but they’ve kinda hinted at it, and vastly different ROI expectations between marketing channels is a bit hard to understand.

How Far Should You Go?

Nicholas at Google is certainly right that pushing from 1 to 2 is certain to be rational. Whether moving from 2 to 3 or even into 4 makes sense may depend on the shape of the curve.

If the marginal ROI drops like a rock, it could be that the channel is effectively maxed out, either because you’re at the top of everything that matters to your brand, or your competitors are being so much more aggressive it doesn’t make sense to chase them.

However, if bidding more aggressively generates material incremental returns, consider the extent to which the arguments for 4 apply to your brand. What’s the lifetime value of a customer for you? How significant could untracked spillover be? What is the Word-of-Mouth value of a customer?

To this last point — if the answer is, “I have no idea,” consider doing this down and dirty analysis:

1. Do a survey of 100 random converting new customers on your website who reached the site through a brand search or direct navigation and who had no prior interaction with other marketing channels as best you can tell.
2. Ask them: “Why did you come to our site that day?”
3. Tally up the fraction of these new customers who say something like ‘a friend/relative suggested I go to your site.’ Call that X. You might be startled at how large X is.
4. What fraction of all customers are new customers coming in via brand search or direct load? Call that Y.
5. Multiply X and Y and call that Z. Might Z represent the number of additional customers brought in by WOM of other customers? Would that materially increase the direct lifetime value a customer?

Hacky, yes — but sometime hacks are valuable enlightenment.

Whether 2 is right for you, or something more like 3 or 4, will depend on many factors. Ultimately, more aggressive advertising, into the world of untraceable effects, needs to result in a healthier P & L. If it doesn’t, maybe easing off the pedal is right.

Hope this is helpful fodder for discussion.

Drive carefully.

Stock image used with permission of Shutterstock.com

Using Paid Search To Aid Your SEO

A lot has changed in the world of search marketing over the last year. From Enhanced Campaigns to Hummingbird and not provided, search marketers have had to rethink and re-calibrate their strategies significantly. Some changes caused more uproar than others; but, one thing has become increasingly clear: the art and science of both SEO and paid search, respectively, are on a crash course, and a consolidated strategy is required to get the most out of both channels.

At my agency, we’ve been working on ways to get more creative with our PPC campaigns in order to directly benefit our SEO efforts. PPC has much more immediate and measurable results than SEO, and as a result, we can use paid search as a testing environment for SEO strategies. The goal is to provide a proof of concept before investing any long-term resources into a project.
In the holiday spirit, we’d like to share three of the concepts we’ve tested and had some success with.

1. Keyword Identification

Both paid search and SEO revolve around keyword lists. Paid search provides one of the cleanest environments for organically identifying search queries used to reach your site.

Search Query Reporting

When using paid search to inform your SEO keywords, you should:

1. Identify the highest converting and highest cost-per-click keywords in your paid campaigns driving high value visits
2. Organize by difficulty to rank organically on these terms through Google keyword planner and SERP analysis

Prioritize SEO resources to rank for converting and/or high-value, visit-generating search terms by developing and promoting content around those terms.

2. Title & Meta Description Testing

Paid search ad copy consists of a maximum 95 characters. Meta descriptions are optimally 155 characters. Those aren’t exact matches, but the character limits are close enough to legitimize a testing ground for user preference.
AB test description snippets in ads tied to relevant keywords. Let click-through rates dictate description evolution while considering Quality Score improvements as Google’s way of suggesting what is and isn’t relevant.

Meta Description Opportunities

In the example above, Foot Locker could use proven paid search ad copy to write up an engaging meta description.

3. “Proof Of Content” Testing

Targeting a highly competitive term for SEO can be costly. Working all the way to the top only to find out that your content is not what users are looking for is both frustrating and a waste of resources.
Paid search can be an effective way to quickly and efficiently send traffic to new content to gauge user reaction and test interaction rates. If users like the content, so should Google.
Build out a handful of ad groups with highly relevant keywords and ad copy directing traffic to the content you wish to promote. If the call-to-action is clear, then the data should tell you fairly quickly whether or not the content is viable and potentially valuable.
The cost to generate a statistically significant amount of data via paid search is far less than the cost of technical resources to rank organically in a top position.

Concluding Thoughts

Whether your marketing department is on a shoestring budget or you work for a large corporation with unlimited resources, you need to be intelligent about prioritizing your search marketing efforts. Chances are your paid search team is already doing most of these tasks and can easily incorporate some ad hoc analysis to aid SEO efforts.

How Recent Organic Search Changes Will Affect Paid Search

Search marketers were pitched not one but two curveballs recently which have forever reshaped the landscape of search engine optimization (SEO).

The industry saw the first one coming a mile away as Google began encrypting organic search queries two years ago. Now, there’s almost zero visibility into the organic keywords which drive visitors to websites (other than what is offered in Google Webmaster Tools).
Understanding the granular relationship between a website and its organic keyword traffic has been the core of modern SEO. Without this deep level of insight, it becomes clear that organic search marketers will have to adjust their approach.
The other major change crept up on the SEO community as the Hummingbird algorithm was live for a month and was a virtual secret until Google announced it in September. This is rather unusual as SEOs have been quick to notice previous, major algorithmic changes the moment they have been introduced. For example, when Google released the Panda update a few years ago, some sites immediately experienced a major drop in traffic and publicized their woes.
Hummingbird focuses on better understanding the concepts within a query rather than relying strictly on the alphanumeric characters and matching them up.
Google provided fairly transparent rationale for both changes. Consumer privacy concerns were at the root of organic search keyword encryption and prompted a larger discussion over what kind of data Web publishers should share outside of their own walls. With Hummingbird, Google hopes to improve search engine results by better discerning the concepts behind a search than ever before. It reportedly works much better with mobile search where consumers using voice search generally input longer queries than typed searches.

The Impact On Paid Search

A complex relationship has existed between paid and organic search ever since the rise of search engine marketing in the late 1990s. The most successful brands have found ways to integrate the two disciplines and connect them as one holistic search engine marketing program. These elite marketers operate with an understanding that when one lever is pushed, it pulls on the other.
One of the initial assumptions discussed in the SEM blogosphere was that these recent natural search changes may drive some SEO budgets to pay-per-click (PPC) search. Well-known search marketer, Eric Enge, CEO of Stone Temple Consulting, hasn’t yet noticed this shift. “While some people may do more PPC as a result of the recent Google changes, we have not seen any mass movement in that direction among our clients,” says Enge.
Advice Interactive Group’s VP of Media, Shelley Ellis, feels there may have been some business motivations behind some of these moves. “Shortly after the first time SEO encryption was announced around May of 2010, I predicted that part of Google’s reasoning behind that decision might have something to do with the future of search remarketing on Google AdWords,” Ellis explains. “I found it interesting that Google’s recent announcement or update on this element of SEO coincided with Google’s search remarketing coming out of beta (now available to all advertisers).”

Will Budgets Migrate?

Only time will tell if some portion of SEO budgets will migrate to paid search campaigns. For now, SEOs seem to be contemplating how their approach needs to change in order to roll with the punches. One of the action items is to get more integrated with PPC counterparts to supplement the data loss from encrypted search.
“It used to be that SEO pushed keyword information to PPC but, with SEO keyword encryption, now the SEO teams are asking for information from the paid media teams,” says Ellis. “Through analytics and matched search queries, we can now break down the types of keyword searches that brought a searcher to specific PPC landing pages.”
Paid search marketers may find their approach evolving as well. With Google now matching search queries slightly differently than before, there could be some useful insights from organic search on how to best to target and message consumers.
“Hummingbird’s push toward better understanding a user’s intent during a search may cause publishers to focus more themselves on building pages and PPC campaigns around user intent, as well,” says Enge. “That won’t happen overnight, but I can see it happening over time.”
There’s no doubt it’s key to tap into Google’s deep understanding of what consumers really want from their searches. Before Hummingbird, it was all about matching alphanumeric strings, so many paid search marketers may not have paid much attention to user intent. Now, as Google applies its Knowledge Graph for better organic search results, paid marketers can leverage these insights as valuable market research.
Paid and organic search are the yin and yang to the bigger puzzle that is search engine marketing. Whatever impacts one, may impact the other. Although the long-term effect that these recent organic changes will have on both may not be known for some time, search marketers can only act in the short term and hope for the best. It would make sense for each side of the lake to stay connected – there’s a good chance that the ripples and waves from one will certainly be felt by the other.

The PPC Experiment You Never Dare Run

A question that PPC account managers frequently have to deal with is, “Why are we paying for this traffic? Aren’t we going to get that traffic anyway?”
It’s a fair question, even if it is completely annoying to hear for the twentieth time by the twentieth new accounting manager you’ve had to break in. No matter what data you present, no matter how perfectly your charts demonstrate perfect, positive correlation between ad spend, revenues and profits, they never seem satisfied with your answer.
“Fine,” you say. “Let’s try an experiment. We call it the PPC nuclear option.”
“The nuclear option?” the accountant gasps. ”What’s that?”
“Well,” you continue obligingly, “We take all our PPC ad campaigns offline for a few months, and see what the true impact on our bottom line looks like. I just need you to sign off on it here….”
That usually ends the discussion — at least until next month’s AdWords and Bing Ads bills come due.

The PPC Nuclear Option — For Real!

I won’t bore you with the juicy details of how it came about (unless you promise to buy me a drink next time we meet), but the long and short of it is that I am now in the middle of a real-life PPC nuclear option experiment.
Campaigns that had been running for a few years were taken offline abruptly three months ago, and we are just about to put them back online. The website is now relying completely on referral and organic search traffic. The website itself and all downstream processes have remained virtually unchanged.
I thought it would be interesting to make a few simple observations at this point in the experiment. I’ll save deeper analysis for a later date, after we’ve put the campaigns back online.
Observation #1: Greater Than Expected Decline In Keyword Conversion Performance

Keyword conversion performance  before and after the “PPC Nuclear Option” was detonated.

Before we detonated the nuclear option, we were aware we’d lose substantial traffic to the site because about 70% of our traffic was coming from paid traffic sources. What we didn’t know was how our brand keywords or our highest ranking keywords (which were also part of the URL) would fare.
In the chart above, I’ve summarized the before and after conversion volumes for most important keywords that have driven conversions and was surprised by some of the results. We looked at our brand keywords, keywords that were prominent on the site and which appeared in our website URL, as well as our most productive non-brand keywords.
Branded Keywords - Our client’s brand is not a household name and there’s not a lot of search volume associated with it, so our brand keywords have never been our largest source of search conversions. They do, however, rank highly and so we were surprised to see conversion volume on them drop by 28%. We figured, based on earlier studies on brand keyword cannibalization, that we’d see only 10-15% drop in conversion volume for our high-ranking brand terms.
What would account for a greater than expected decline in brand term performance? I have a hunch that our Google GDN display ad campaigns may have been providing a lift while they were running, but since we are not a famous brand, that halo effect only lasted while our display ad campaigns were running. If my theory is correct, we should expect to observe an uplift once we start advertising again. Stay tuned.
URL Keywords – Our next best performers were keywords that literally described our products and which appeared in our website URL. These keywords have generally been at or near the top of the organic search listings, and they perform more like brand terms than generic keywords. We were most surprised that these would have dropped by a whopping 59%.
Non-Brand Keywords – We were also astounded at how deeply the PPC nuclear option demolished the performance of our best non-brand keywords, which dropped pretty near to zero.
Clearly, this client is too dependent on paid search on its most important terms.
Observation #2: Organic Traffic Needs To Contribute More Search Volume

After taking PPC campaigns offline, online organic and referral traffic remain.

This Google Analytics graph shows all search traffic from 2009 through 2013, and to my last point, demonstrates a highly unbalanced mix of online traffic sources, since 75% of their visitor traffic dropped when the nuclear option was detonated. I don’t know what the perfect ratios should be for organic to paid search traffic, but in general, I think most of us would agree that, over time, the mix should start to skew toward more unpaid sources of traffic and rely less on paid traffic.
Of course, figuring this out didn’t require taking the nuclear option because the data has been there the whole time. It does certainly lay bare the situation unambiguously, however. The accounting manager will love this data, and so will the SEO team (that doesn’t exist at the moment) because it shows how even modest investments in SEO can be justified financially.
Observation #3: Friendly “Ghost Clicks”

Google Analytics reports a small amount of PPC ad “ghost clicks” even after taking campaigns offline.

Even two months after taking the campaigns offline, we are still getting visitors from “ghost clicks.” Most ghost clicks happen when a visitor types your URL into their browser after first clicking on your ad. When they start typing the URL, their browser cache types ahead for them, showing them your URL along with your original URL tracking variables. We observed about 4% of our visitors coming in this way, but they represent only about 1% of the original ad click volume.
I don’t know what a good “ghost click” ratio might be, but I’d like it to be higher because that means that our site was so memorable that people typed it into their browser rather than doing a new search.
Observation #4: Unfriendly “Ghost Clicks”
I’ve observed that not all PPC Ad ghost clicks are friendly. In some cases, they may be competitors doing deep dives on your site for whatever nefarious purposes they have in mind. Here’s my evidence of unfriendly ghost clicks:

Hmmm… Lots of visits all of a sudden from PPC ad ghost clicks. Does not look like a friendly ghost to me.

Why would we, all of a sudden, get hundreds of PPC ad ghost clicks when our campaigns are clearly turned off? My first guess was that someone accidentally turned them on; but no, that wasn’t it. I dug one level deeper in Google Analytics and found that all the clicks were coming, on different days, from different locations.

Who clicks from Beverly Hills, Little Ferry and Trinidad? Jet setter, perhaps?

Using my best TV detective deduction skills to develop a profile of the perp, I see that the clicks come from Beverly Hills, CA and Little Ferry, NJ. Both are pretty affluent suburbs. I also see clicks from Trinidad. Could this be a rich jet-setting venture capitalist trying to discover our secret sauce? If so, I’ll bet they are also reading my column; so to you I say, “I know who you are, and I saw what you did.”
Observation #5: Google Analytics’ Accounting For Paid Search Clicks Is Excellent
I had a weird observation when looking at my paid search clicks versus my analytics data. Google Analytics was reporting 7% more clicks than we actually paid for from all our paid traffic sources. I know that Analytics and AdWords account for clicks differently and that Google Analytics reports clicks (suspicious or otherwise), but I never took notice of how great the difference was.
I ran an AdWords invalid clicks report and subtracted those from my Google Analytics total, and found that the number of clicks from our paid search campaigns matched up almost perfectly (99.1% match) with the clicks Google Analytics reported receiving.
An added surprise was my discovery that Google AdWords continues to credit invalid clicks to the account even after turning off all spend. It wasn’t a large amount, but it was a very pleasant surprise nonetheless to see additions to our account balances.

Questions About The PPC Nuclear Option?

I’ve touched on just a few of my own casual observations from this unplanned PPC nuclear option experiment, but there are so many other observations to be made as we bring this campaign back to life. If you are curious about any part of our experiment, and have questions of your own, please leave a comment below, and I’ll see if we can get an answer for you.