January 2005 - Revving Up Your Search Engines

Internet search engines can be terrific vehicles for DR marketers. But watch out for that learning curve.

By Jack Gordon

Whatever media you use for direct response advertising campaigns-TV, radio, print, Internet-you’re spending a lot of money to create demand for your products. What do consumers do these days when they hear your message but can’t remember your 800 number or your Website address?
Here’s what they do: They go to an Internet search engine like Google or Yahoo and try to find you. Incidentally, they do the same thing when they’ve never heard of you but they’re comparison shopping for products like yours.

In either case, the question becomes, how easy will it be to find you among the thousands of hits they get in response to a search term like home gym or vitamin supplement or how to + personal wealth?

Your power to determine the answer to that question is limited only by your budget. And even with a small budget, you can improve your odds. One solution is to pay search- engine companies for “sponsored links” that will appear prominently among the top results for certain search terms. Another, which can involve significant hidden costs, is to design your Website in such a way that it will show up high on the list of natural or “organic” hits for those same terms.

Regardless of the types of products you sell, DR marketing experts recommend that you do both. In fact, they say you would be making a costly mistake if you fail to pay close attention to the role that search engines can play in your marketing efforts.

“For most people in the DR business, search engines are the most effective online advertising tool they can use,” says Marty Fahncke, president of FawnKey and Associates, a marketing consulting firm in Salt Lake City. “You’ve got to help buyers find you again after you’ve reached them once (with an advertisement).” On TV or radio, he says, “you don’t necessarily reach them at the time they’re looking to solve a problem. But when they find you on a search engine, you’re reaching them at the exact moment they’re ready to buy. That’s retailer nirvana.”

Want to attach a number to the additional revenue you can generate with effective search engine marketing (SEM)? Most DR advertisers will find they can increase orders by 15 percent by buying sponsored links to keywords they use on TV, says Jeff O’Connor, vice president of sales and media for Livemercial Inc., an online DR advertising agency in Valparaiso, Ind. And you can boost sales further “by marketing on other keywords to reach customers you’d normally never reach.”

According to a recent study conducted by the Search Engine Marketing Professional Organization (SEMPO), it is estimated that U.S. and Canadian advertisers will have spent $4 billion in 2004 on SEM. That data includes payments to search engines and search-related media firms, search engine marketing agencies and in-house expenditures. If you are new to search engine marketing, the costs and tracking mechanisms are straightforward enough that you can test the water without any special expertise. With a few simple precautions, you can try it out with no great risk, and probably generate some additional sales. But doing it well is another story. Fahncke says that companies can generate hundreds of thousands of dollars a month via search engine marketing. But to do it, most of them buy 400 or 500 keywords and budget $20,000 to $50,000 monthly. To optimize a search-engine campaign like that, you’ll need a lot of in-house time and expertise or the help of an agency.

Search Engine Marketing Quick Facts
>>On average, advertisers said they’ve seen bid prices increase 26 percent in the past 12 months for keywords they commonly purchase. However, they said they could handle another 33-percent rise in the price and still make a profit.

>>About 41 percent of advertisers reported that search engine marketing (SEM) budgets were newly created funds for this purpose. The remaining advertisers contended that SEM budgets were coming in whole or in part from shifts away from traditional or Internet marketing programs.

>>Brand awareness was the overall number-one initiative advertisers had for search marketing programming. This ranked higher than sales and lead generation objectives.

>>Half of advertisers surveyed said their senior executive staff labeled the company’s search marketing objectives a “high priority.” However, that figure decreased to 32 percent with firms that had staff sizes greater than 500.

>>Advertisers are expected to spend an average 39 percent more on all SEM programs (organic SEO, paid placement, paid inclusion and SEM technology) in 2005, compared to 2004.

>>Smaller companies projected spending 32 percent more on SEM programs, while larger firms (over 500 employees) forecasted a 43 percent year-over-year increase.

>>SEM agencies projected budget overall gross revenue increases for 2005 of 79 percent on average.

Source: SEMPO, “The State of Search Engine Marketing 2004″

There are two “first-tier” search engine companies. Google, the dominant player in the industry, also powers Internet search functions such as the one on America Online (AOL). To buy sponsored links on AOL’s search function, you deal with Google.

The other major player is Overture (www.overture.com), which is owned by Yahoo. To buy sponsored links on Yahoo, MSN.com, Altavista, NetZero, CNN.com and other engines, you deal with Overture.

Together with their partner engines, Google and Overture account for about 90 percent of all Internet searches. These two are where you start-and maybe where you end. “Search engine marketing is a numbers game, and you want to focus your efforts where you’ll get the most numbers,” says Tony Sziklai, IT director for Moulton Logistics Management, a national DR fulfillment company in Van Nuys, Calif.

No matter which search engine company you deal with, the pricing for sponsored links operates on a pay-per-click basis. For each term you buy, you pay the search engine company a certain amount for every person who clicks through to your site.

The price you pay for a given term-and for the position of your site on the list of sponsored links-depends on the popularity of the search term. Essentially, the whole thing operates on an auction basis: You bid for the position you want. Prices vary from five cents per click to upwards of $12.

Overture’s auction model is the most straightforward. Do you want the No. 1 sponsored position for the search term widget? Just bid a penny more than the next highest bidder, who immediately drops to No. 2. This means that “prices evolve constantly,” explains Patricia Neuray, Overture’s eastern regional vice president.

On Overture’s Website, you can check up-to-the-minute bids for any search term. On a day in November, the No. 1 sponsored link for the term diet was going for $1.04 per click. The top bid for vitamins stood at 67 cents. Refinance was a hotly contested term, with bids for the top five positions ranging from $12.09 to $12.06 per click.

The No. 40 bid for the term diet was only 20 cents, and the term refinance garnered a $2.05 bid. The catch is that only the top three sponsored links are guaranteed to appear on all of Overture’s partner sites. Yahoo and a few other partner engines show more than the top three, “but as a rule of thumb, if you’re in the first three spots you’ll maximize visibility,” Neuray says.

Google’s formula is a bit more complicated. The position of paid links is determined both by the price an advertiser bids and by the advertiser’s click-through-rate. Suppose that Sponsor A bids $1 per click for the term widget and has a click-through rate of 1 percent. Sponsor B bids 50 cents, but has a click-through rate of 3 percent. Sponsor B will get a higher position, explains Livemercial’s O’Connor, because Sponsor B winds up paying more to Google.

Since the process is straightforward, the search engines will track your click-through rate for you, and you can probably track your own conversion rate from those clicks, “I’d never discourage anyone from doing paid placement on their own,” says Ed Elliott, president of Media Partners Worldwide, a full-service ad agency in Long Beach, Calif.

Again, however, doing it well is a different proposition from doing it at all. Whether you go it alone or enlist the help of an agency, here are some tips.

DO: Track and test everything about your search-engine campaign. “This is such an accountable medium, and if you’re not taking advantage of that, you’re handicapping yourself,” says Matt Kain, senior vice president of search operations international for 24/7 Search, a division of marketing agency 24/7 Real Media of New York.

Track your click-through and conversion rates for individual keywords. Test new keywords. Test different titles and descriptions for the copy in your links. Also, test different search engines, seasonal offers and different positions among paid listings. As with any advertising medium, the game is all about ROI. Test and track to find out which combinations give you the highest return for your money.

“Here’s a million-dollar secret,” says Fahncke: “The No. 1 position is usually not the best place to be.” Searchers are comparison shopping, he says. “They click on your top ad, you pay for the click, then they look at the next three or four paid links before they’re ready to buy.” Since your No. 1 spot is the most expensive, sometimes by a wide margin, “you pay a premium for more window shoppers than anyone else, but you may not get more buyers.”

DO: Cap the number of daily clicks you’ll pay for until you have a handle on your costs and your conversion rates. Search engine companies allow you to set caps, and this is a must if you’re just starting out, says O’Connor. “A single weekend’s worth of traffic can kill you if you aren’t converting and you aren’t paying attention.”

DO: Send search traffic to the most specific possible page on your Website. In your listing for a broad keyword like electronics, you can send people to your home page, says Kain. But for the search phrase “wide-screen TVs,” send them to your TV page. For “Sony Model XYZ,” let them click through to that specific page. If searchers can’t find what they’re looking for quickly on your site, they’ll just back up and click on someone else’s link.

DON’T: Buy only search terms that you consider obvious. “A big mistake marketers make is to assume they know what words and phrases consumers will use to find them,” says Fahncke. Another million-dollar secret from both him and Neuray: Have a search box on your own Website and keep a log of everything visitors search for. “You’ll be amazed at the phrases and spellings they use,” Fahncke says. Bid with Google and Overture on those phrases and misspellings. They’ll be cheaper than the obvious terms your competitors use, and will give you better-targeted traffic.

DON’T: Forget to watch out for trademark infringement and click fraud. These are the two major dangers of search engine marketing.
Trademark infringement can occur when competitors buy your trademarked terms (PowerCrunch Home Gym) and direct searchers to their knock-off products. Search engine companies are good about policing this, experts agree, but you may have to tip them off. And the engines do not police organic (non-paid) listings from competitors who have buried your trademarked terms in their own Websites. Even if you aren’t doing any search engine marketing, type your trademarked terms into Google, Yahoo and other engines from time to time. You may get a rude surprise.

Click fraud occurs when your competitors conspire to click through to your site hundreds or thousands of times, driving up your costs. Elliott calls this a “huge problem” with highly competitive keywords, especially in the diet and financial industries. Again, search engine companies are good about policing it, but you need to pay attention, he says, “so you don’t wind up paying $100,000 for five sales.”

Jack Gordon is editor-at-large for Electronic Retailer magazine. To submit comments, point your browser to seo.marketing-era.com.


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