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Can you explain to us how paid search works and what the pricing structure looks like?

When determining what to pay per click, is there one spot that works as good as another for a lower price? For example, is the third spot just as effective as the first spot? Or is it the second to third? or is it second to first? What about the fourth and on down? What are the statistics to get more bang for the buck?

Jim

Absolutely. Hello everyone!

It occurred to me that one of the things that's most important to understand about Paid Search is which listings are paid for on a search results page and which ones are reached through engine crawling/algorithms (SEO). Generally, when you look at a search results page, the listings at top and right of page are considered Paid Search listings. These are usually in a box that is light blue or grey, depending on the engine, and somewhere nearby it says "Sponsored Listings." Ok, now we know what we're discussing...

Devaney poses a great question which is how does the pricing structure work...

"Buying" search keywords is done on a CPC (Cost Per Click) basis. That's why sometimes you'll hear folks call Paid Search Marketing "PPC Search" too. (Pay Per Click) That means, you don't pay for your ad to appear (like in a lot of traditional and online marketing), but instead you pay only when a person Clicks on the ad.

The part where it gets interesting is that there is no "rate card" or standard pricing for search. You actually put into Google, Yahoo, MSN or other paid search engine advertising platforms the price you want to pay for the click. This is called a "Max Bid" - the maximum you are willing to pay for a click in the system.

And in this way, clicks are auctioned. So it's a little like eBay, a little like the stock market.

Every keyword costs something different, and it changes over time - based on:

• INVENTORY: the number of searches people are making on the word (Impressions)
• DEMAND: the other advertisers in the marketplace bidding on the word (# of advertisers, their bids, their budgets all impact price in real time)

This is a high level explanation. Let me know if you have follow on questions about how that works...

MC

Hi Littlebytes!

There are many ways to market online business without overextending your budget. In some instances, competing with major brand advertisers is as difficult online as it is when you have physical/brick-and-mortar retail stores. Just like in that instance, you have to compete on the niche you fill, the unique perspective/service you provide your customers, and perhaps the community of customers you build around the wares you sell online.

Search is the second most utilized online channel (next to email), and it is one of the most efficient online marketing channels from an ecommerce ROI standpoint. The nice thing for the niche or small business advertiser, is it is also a media that can scale very large or be bought in small amounts to fit your budget. So you can test search without laying out a ton of dough.

If you really are taking on large advertisers, I would suggest you carve out a few items in particular from your store where you get many sales already, and test buying keywords related to those items first. Then grow your search program from there.

Good luck!

MC

Hi Jim,

Oh I wish it were so... Actually, not only does every keyword have its own best position, but it can change at any given moment, and it can be different on Google than it is on Yahoo, MSN, Ask or AOL, etc.

But have no fear. We do not let these details debilitate us!

The most important thing to consider is your end business goal. You should try to determine the amount of money you are willing to pay for an action (preferably one that can be measured and recorded on your site). So, you might be willing to pay a certain amount for a New Customer or a Sale or a Site Visit. Let's call these "Conversions" for the sake of simplicity in this forum.

The best way to manage search is to a target goal like that, so you're not just concerned with the price you are paying for the click but also with the end result you are achieving with search. In this way you can determine which keywords have highest potential return for you, and in which position they perform best.

As far as finding out the best position for a given keyword, it does take time, effort and astute measurement of your program's performance. You should pay attention to the impact bid changes and position changes have on your Average CPC and your Conversions. And you should pay attention to what your competition is doing - as their goals and offers can also dictate which positions are best for your ads.

MC

Well, Lighthouse24...

Given your focus on Executive Managers in your business, I will provide the ultimate B-school answer first, which really does apply here. It depends.

I will also be so bold as to say that in my career, I have seen search work as a successful marketing channel in one form or another in every major industry for both large and small marketing programs. (So those industries I speak of include Financial Services, Automotive, Travel, Consumer Packaged Goods, Apparel, Telecommunications, Consumer Electronics, Toys, Pharmaceuticals, Enterprise Software, and Entertainment)

Gee, I would love to be thrown some industries to play with for discussion's sake here on the forum - are there industries you are thinking search would not work for?

Here are some thoughts about your question that I think are worth considering for a small business owner thinking about Search...

All search queries are created equal. Meaning, at the very beginning, a person opens a window and types a string of keywords into a search engine with one burning question in their mind. And every question deserves an answer.

Being the company to provide that answer has a variable value by industry and engagement type. That value by industry/company has to be calculated based on specific business goals. The nice thing about Search is that it is possible to map action resulting from a search query back to the media. So it is possible to create benchmarks for success.

There are two grounds on which one can consider your question:

1) Volume of Opportunity
While all queries are created equal, some queries are more popular than others. People are more likely to ask questions about certain topics more than others in a search engine, and so the Volume of opportunity (available Impressions) for a given advertiser may differ based on the popularity of questions posed about it.

2) Likelihood to Convert (ie translate into a Conversion - see earlier posting)
This is the element that should really matter to any manager considering Search for a small business. Likelihood to convert does not just depend on the industry in which one plays, but also the competition you are up against (within and without of search), the offers you are bringing to market, how your web site works, how people convert (online, in stores, by phone), etc.

Further study of this, and benchmarking certainly is worthwhile...

MC

Sure, Jim.

The two best ways to be sure you are getting what you pay for:

- Manage your program with "back end tracking" in place. So tying your clicks back to conversions or particular actions on your web site. Reporting on this frequently enables you to audit the efficacy of your search campaigns on a sale basis, not just on clicks.

• Review search query reports in Google. This is a report that has only been available about a year - but it is really handy way to make sure that your ads are not getting clicked on for keywords that you think are irrelevent to your offering. If you see keywords in there that you think are misaligned to your goals, add them to your "Negative Match" keyword list. Then Google will know not to show your ads when that word is queried.

I encourage you to remain optimistic. Google isn't out to get you. They want to make sure that the people searching are getting relevant information. So the more relevant your ads are to the keywords they are appearing on, the better for them, too. That's why Google also audits for click fraud, and automatically discounts clicks on their end if they think they are suspect, too.

Hope that helps!

MC