Chapter 7 Pay per Click Advertising

History

You have learned that search engines display results to search queries based on proprietary algorithms. Each major search engine uses its own formula to determine what results to display for any term. All of this is available to Web users for free! With about 80 percent of Web users using search engines as a starting point,Bernard Jansen and Paulo Molino, “The Effectiveness of Web Search Engines for Retrieving Relevant Ecommerce Links,” Information Processing and Management 42 (2006): 1077, http://ist.psu.edu/faculty_pages/jjansen/academic/pubs/jansen_ecommerce_ipm2006.pdf (accessed April 3, 2008). that’s a lot of traffic going through search engines each day. So search engines require a way of generating revenue from all that traffic.

In 1996, the Open Text Index search engine began allowing Web sites to pay for a preferred ranking in selected results pages, to mixed response from business owners and other search engines. However, this was pay for placement, not that different from paid inclusion, where advertisers were paying to appear in the search results, whether or not a user clicked through to their site.

In February 1998, GoTo.com was launched. This was a new search engine that allowed Web site owners to bid for placement in the search results pages for specific search terms. Results were ranked according to how much the Web site owners were willing to bid, with the highest bid appearing at the top of the page. The Web site owner would only pay for each click, as opposed to for appearing on the results page. By July 1998, advertisers were paying up to a dollar for each click! GoTo.com changed its name to Overture Services, Inc., in 2001, and was acquired by Yahoo! in 2003. GoTo.com partnered with the portals Yahoo! and MSN to monetize their search queries.

Overture successfully patented their PPC mechanism for search engines (“system and method for influencing a position on a search result list generated by a computer network search engine” was patented in 2001) and has since then pursued, successfully, lawsuits against other PPC providers, including Google.Danny Sullivan, “Overture Files Lawsuit against Google,” Search Engine Watch, May 6, 2002, http://searchenginewatch.com/2164761 (accessed June 18, 2010). Overture initiated infringement proceedings under this patent in 2002 and settled with Google after it had been acquired by Yahoo! Google agreed to issue 2.7 million shares of common stock to Yahoo! in exchange for a perpetual license.

Google started search engine advertising in December 1999 and launched AdWords in October 2000. AdWords allowed advertisers to place keyword-targeted listings but charged advertisers on a CPM (cost per mille) basis. Google launched PPC advertising in February 2002, and today, advertising accounts for about 99 percent of Google’s revenue.

Search and Content Networks

Advertisers can choose to have their advertisements displayed on the search network only (which means on search engines), or they can select to have the advertisements displayed on the content network.

The search network will include the search engine that owns the platform (so Google for AdWords), as well as other search engines for which that platform provides paid results (e.g., currently Ask.com uses the AdWords platform for paid results).

Figure 7.2 Suppliers and Search Engines as of 2007“Search Engine Results Chart,” Search Engine Watch, March 23, 2007, http://searchenginewatch.com/2167981 (accessed June 18, 2010).

The content network refers to Web sites other than search engines that also display PPC advertisements. For Google AdWords, these are the Web sites and blogs that have joined Google AdSense, Google’s publishers’ platform. Google determines the content of the Web site and then displays appropriate PPC advertisements. Typically, the CPC (cost per click)Paid when a link is clicked upon. for text ads is lower than on the search network, but the CTR and conversion ratePercentage of actions divided by click. can be much lower. The Google content network also allows image, video, and mobile ads.

Figure 7.3

The site below is running AdSense. Notice how the advertisements correlate to the content of the article.

What Makes Up a PPC Advertisement?

Text PPC advertisements follow the same basic structure:

The URL (uniform resource locator) shown is not necessarily the URL that the user will click through to. When writing the copy, these are known as the display URL (what is shown on the advertisement) and the destination URL (what the actual URL of the page is). The display URL is sometimes also called a vanity URL. The aim should be to send users to a Web page as specific to their search, and the PPC advertisement, as possible. This is known as deep linkingMaking a hyperlink that points to a specific page or image on another Web site instead of that Web site’s main or home page..

The display URL must be the same domain as the destination URL. Google will only show one advertisement per display URL. So an advertisement might look like this:

The search engines limit the characters in each line. There are also restrictions on what you are allowed to write in an advertisement. Here are some of the editorial guidelines from Google AdWords:

• Heading. Maximum twenty-five characters
• Line 1. Maximum thirty-five characters
• Line 2. Maximum thirty-five characters
• Display URL. Maximum thirty-five characters
• No repeated exclamation marks
• No word may be written in capitals only
• No nonsense words may be used
• No claims of “best,” “number one,” or superlatives may be used unless they can be verified by a reliable third-party source
• Product numbers may be used

Languages and Locations

You are able to target your campaigns, so you know that the trafficThis refers to the visitors that visit a Web site. you are getting is relevant to your product. This is known as geotargeting.

You can choose the language of the search engine and the location. For example, you might only want your advertisement to show to English searches in Asia, or to English searches in London. Targeting your advertisement means that you won’t pay for traffic you don’t want.

Bidding and Ranking

Advertisers need to determine the maximum they are willing to pay for a click on their advertisement, and they need to decide this for each keyword they enter for an advertisement. This bid is the maximum CPC (cost per click), or max CPC, that the advertiser is willing to pay for the click.

However, this will not necessarily be the CPC that the advertiser must pay for a click. Every time a search query is entered, the search engine runs an auction to determine the placement of the advertisements where advertisers have bid on that search term. This auction is known as a generalized second price (GSP)Auction type that search engines are modeled after. auction, which is a variation on the Vickrey auction.

In the GSP auction, each advertiser will pay the bid of the advertiser below him, plus a standard increment (typically $0.01), for a click on the advertisement.

Say three advertisers, A1, A2, and A3, bid $2.50, $3.00, and $2.35, respectively, on the same keyword. The search engine has set a minimum price of $2.05 on that same keyword. Figure 7.6 "Example of Advertisers Bidding on the Same Keyword" shows how the advertisements would be positioned and what they would each pay for a click.

Figure 7.6 Example of Advertisers Bidding on the Same Keyword

When it comes to rankingProcess by which search engines display Web sites so that the most relevant Web sites appear on the top. Search engine optimization is a technique by which high rankings may be obtained., of course, it’s not quite as simplistic as that. As well as the bid an advertiser places on a keyword, the search engine will take a number of other factors into account. In the case of Google AdWords, this is known as Quality ScoreGoogle’s basis for determining the minimum bids for keywords, based on relevancy and historical data..

The Quality Score is determined by the following, among other factors:

• The relevance of the keyword to the search term
• The relevance of the advertisement copy to the search term
• The relevance of the landing page to the search term
• The historic click-through rate (CTR)Clicks divided by impression percent. of that advertisement

Search engines look at factors such as relevancy to try to ensure that it is not just having deep pockets that can land advertisers the top spot. Search engines need to ensure that users find the advertisements relevant, otherwise they’ll be less likely to click on them—and no click means no revenue for the search engine.

Conversion Rates and Click-Through Rates

Figure 7.7 A Heat Map from Eyetools.com That Shows Where Users Look on a Search Engine Results Page (SERP)

Source: Heatmap generated by Eyetools, Inc.

Studies repeatedly show that those advertisements nearer the top of the page (so the best ranked) attract the highest CTRs (click-through rates). They get the most clicks. And the clicks cost the advertisers more.

Looking at the heat map, you can see that getting in the blue box on Google will most likely generate even more clicks on an advertisement. You might think the more clicks the better, but is this necessarily the case?

Being in the top position means you will pay more per click. Many clicks at a higher price may use up your budget quickly. Also, many people click on the top advertisement believing it to be the top organic search result—often without reading the advertisement text.

Advertisers need to consider what a user does after clicking through to the advertiser’s Web site from the search engine. When planning a PPC campaign, it is therefore crucial to set up the goals of the campaign and make sure that these are being met. You can use your analytics package to set these up. With a goal set up, the advertiser can track how many of the users that click throughA click on a link that leads to another Web site. to the Web site follow through to that goal. This is called a conversion.

Goals can be any of the following:

• Buying a product
• Filling in a form
• Downloading a white paper
• Sending an inquiry
• Booking a flight

We know that the CTR of an advertisement is the percentage of clicks divided by impressionEach time the advertisement is shown..

The conversion rate of an advertisement is the percentage of conversions divided by click.

As the advertiser, you also need to know the value of each conversion. You need to know this so that you don’t pay too much for your clicks, and so that you bid to have the best CTR for maximum return on investment (ROI)The ratio of cost to profit (e.g., advertising spending as a percentage of the revenue that it generates)..

Figure 7.8 How to Adjust Bidding Strategies Based on Business Principles

Figure 7.8 "How to Adjust Bidding Strategies Based on Business Principles" shows how you might adjust bidding strategies based on business principles such as the following:

• Example A. Bid on a keyword with phrase match.
• Example B. Bid on the same keyword with phrase match, but bid for a higher position. The conversion rate of the Web site remains the same, but because of the higher CPC, the CPA (cost per action)Paid when a certain action is performed by a user. increases, although there are more conversions.
• Example C. Bid on the same keyword, but with broad match this time. Because the traffic is less targeted, the conversion rate on the Web site is lower. This means that the CPA increases again.

The campaign needs to be run according to business rules. A PPC campaign can aim for maximum conversions, but this is usually at a higher CPA.

Budgets

As well as deciding on your CPC bids for your keywords, you are able to determine the budgets for your campaign. You can set daily budgets, monthly budgets, or no budget. Once your budget is reached, your advertisements are paused, so you can be sure that you never overspend. If you are concerned about overspending, you can set a daily budget. However, this can mean that your advertisements do not run as often as you would wish them to.

The different advertising platforms offer advanced bidding options, all aimed at helping you to run your advertising campaign better. You can bid for placement on the search engine results page (SERP)The actual results returned to the user based on their search query., or you can bid based on how much you are willing to pay for a click. You are able to bid for advertisements during certain times of the day only, called scheduling.

Which Platform Should I Choose?

There is some theory that different platforms are better for different industries. For example, some believe that Yahoo! fares better than Google on travel advertising. However, this is subjective, and most large advertisers will run PPC campaigns on a number of platforms. As with most things in eMarketing, it is all about testing.

There are some small differences with each platform in terms of editorial policy, and each system has a different user interface. Google AdWords, perhaps the most well known, allows users to transact in the currency of their choice and also offers training programs and certifications.

Google AdWords also currently has the best geotargeting worldwide, although geotargeting is offered by both Microsoft adCenter and Yahoo! Search Marketing.

The Long Tail

Google has estimated that 50 percent of searches are unique. This means that the sum of unique searches is about the same as the sum of nonunique searches. Looking a little more closely at search terms will show a small number of high-volume searches, and then a large number of lower volume searches stretching out to those unique searches.

Figure 7.9

In the long tail, the sum of the low-volume searches matches the high-volume searches.

This is sometimes referred to as the long tail of search. Figuring out those low-volume, niche search terms can do wonders for a PPC campaign. Generally there is not much competition for those search terms, and the search term itself is very targeted.

Step 1: Do Your Homework

For a successful campaign, you need a full online and an offline analysis of the business, customer demographics, the industry, and competitors. While it is relatively quick to set up a campaign, preplanning will show dividends later. You need a brand, an identity, and a clear, unique selling point. You only get three lines to advertise, so you need to make sure you know what should be in there.

Step 2: Define Your Goals

You need to know what you want to achieve with your PPC (pay-per-click) campaign. Branding campaigns, for example, are very different from campaigns that increase sales. What do you want users to do once they click on your advertisement?

Step 3: Determine Your Budget, Cost per Action, and Targets

Determine how much you are willing to spend to achieve your goal—your target cost per action (CPA). Decide how much budget you are going to allocate to your PPC campaign. If your goal is to increase revenue, your budget might be unlimited so long as revenue is increasing and you are within your target CPA.

Step 4: Research Keywords

You need to determine what keywords potential customers are likely to use when searching for the service that you offer. Along with that, you need to know the following:

• What common misspellings a customer might use
• What words would show that they are not likely to purchase from you (words like free and cheap)

As part of your keyword research, you need to look at expected volumes for your keywords, so you know how to bid on keywords. See “Tools of the Trade” in Section 7.5 "Online Comparison Engines" for some suggestions.

There are also tools that will show you similar or related keywords, so you can expand your keyword list even further. Again, find suggestions in “Tools of the Trade” in Section 7.5 "Online Comparison Engines".

Step 5: Write the Advertisements

Using your keyword research, write compelling advertisements to promote your products. Advertisements can be unique to a keyword, or you can group them and have a number of keywords for one advertisement.

Make sure you use an appropriate display URL (uniform resource locator) and that you target the landing page for each advertisement. Always include a call to action.

Step 6: Place Your Bids

Based on your goals and keyword research, set the maximum bids for your keywords. Don’t set these too high at this stage—you’ll tweak the bids as you test your campaign.

Step 7: Measure, Analyze, Test, Optimize!

With conversion tracking in place, you can analyze your ROI (return on investment) down to a keyword level, and then focus on those keywords that are converting best. Consider seeing how changing the text of your advertisement can increase the CTR (click-through rate) or perhaps better your conversion rate. Test different landing pages to see what converts better.

Landing Pages

PPC advertising is not just about creating advertisements and bidding for keywords. The process continues once a user has clicked on your advertisement. The page that the user reaches by clicking on an advertisement is called a landing page.

Landing pages can make or break an advertising campaign. Poorly executed PPC campaigns will send all users to the home page of a Web site. Campaigns that convert will make sure that users land on a page that is relevant to their search. The aim is to keep the user as focused on the goal—conversion—as possible. Sending the user to the home page gives him too many other options to choose from.

For example, if someone searched for “Canon EOS 450D,” a poorly run campaign would send that user to http://www.canon.co.uk. A better campaign would have the user clicking through to http://www.canon.co.uk/For_Home/Product_Finder/Cameras/Digital_SLR/EOS_450D/index.asp.

Landing pages also indicate relevance to the search engine, which can increase the Quality Score of the advertisement, and in turn lower the CPC (cost per click) of the keyword. Adding pages to the Web site that are keyword rich can also carry SEO (search engine optimization) benefits.

PPC campaigns often have thousands of keywords, which can mean that there will be a lot of landing pages to be built! Creating dynamic landing pagesUnique, keyword-rich landing pages that can be created for each search using a simple script. means that with a simple script, unique keyword-rich landing pages can be created for every search. The script will take the keyword that the searcher has used, and insert it in predefined places on the landing page. The user will then be landing on a page that is highly relevant to their search!

Dynamic landing pages can be created with a simple script that will allow for a landing page to be created for every keyword in the PPC campaign.

Tools of the Trade

The foundation of search marketing is keyword research, and there are a number of tools that will both aid you in growing your keyword list and in determining keyword volumes. Some are free and some require a fee. Many keyword volume tools have relied on OvertureFormerly GoTo.com, bought by Yahoo! and provider of Yahoo!’s PPC (pay-per-click) advertising. Panama has replaced Overture as the platform that powers Yahoo! Search Marketing., and as Yahoo! is no longer supporting this tool, the information is not necessarily accurate. All these tools should be used as guidelines only. Test the data with your own campaigns to determine what works best for you.

Figure 7.11 Google’s Ad Preview Tool

Keyword volume tools include the following:

• http://www.freekeywords.wordtracker.com
• http://www.yooter.com/keyword/overture.php
• http://tools.seobook.com/general/keyword
• http://www.google.com/trends

Keyword suggestion tools include the following:

• http://adwords.google.com/select/KeywordToolExternal
• http://www.keyworddiscovery.com/search.html
• http://tools.seobook.com/keyword-list/generator.php

Google AdWords has an Ad Preview Tool, which allows you to see where your advertisement would appear on the page (without using the search engine and thus skewing data). This can be accessed at http://adwords.google.com/select/AdTargetingPreviewTool.

Some paid services that aid with keyword research are the following:

• http://www.wordtracker.com
• http://www.keywordsecret.com
• http://www.nichebot.com

Spreadsheets, such as Microsoft’s Excel, are useful to aid you in building your keyword lists. Getting to grips with functions such as concatenation will be useful.

Click Fraud

Click fraud occurs when your advertisement is clicked on by someone who is not a legitimate potential customer. Because an advertiser has to pay for every click on his advertisement, sometimes unscrupulous competitors can click on the advertisement to force the payment. There are even automated bots that can click on advertisements, costing advertisers millions.

The search engines, however, have taken measures to combat this. Advertisers can report suspected click fraud, and the search engines will refund invalid or fraudulent clicks after investigation.

What can you do? Keep an eye on your campaign. Any sudden leap in CTRs (click-through rates) should be investigated, and you should pay particular attention to see if the conversion rate drops (which would indicate potential fraud) or stays the same. Pause the campaign if you suspect fraud, and alert the search engine.

Bidding Wars and Climbing Costs per Click

High-traffic keywords are expensive, and the battle to stay on top means that the CPC (cost per click) of these keywords is escalating. Convincing yourself that it’s number one or nothing can result in burning through your campaign budget quickly with nothing to show for it.

What can you do? Keep focused on your campaign goals and ROI (return on investment), and keep investigating to find the (cheaper) niche keywords that work for you.

Time Required to Keep an Eye on Things

PPC campaigns require a lot of monitoring, and the bigger your campaign gets, the more time this takes. PPC advertising can provide a fantastic ROI, but you need to check in and tweak regularly to make sure that it continues to perform for you.

What can you do? Make sure that you have allocated the time required to run a successful campaign. There are also tools available that make managing large campaigns easier. But remember the following good reasons (and many, many more) why PPC works for you:

• No- to low-cost barrier. You only pay for traffic; there are minimal setup fees involved.
• Tracking every cent. PPC advertising allows you to track your advertising spending down to a keyword level, so you can learn what works and what doesn’t on a small scale.
• Targeted advertisement placement. You can make your advertising relevant with the many filters available when selecting where to show your advertisements.
• Giving your customers what they want. PPC advertising lets you place your advertisement in front of people who are searching for your product. It lets you provide a solution, as opposed to creating an interruption. What more could you want?