Soaring bid prices - what can you do?
As more advertisers fight for visibility on the same paid search terms, how can you maintain return on investment? Charlotte Plumley from Spannerworks Paid Search Team considers some of the options.
2005 was another phenomenal year for Internet advertising. At the half way mark, the Internet had overtaken both radio and outdoor advertising in terms of UK ad spend for the first time. The estimated £864.6m spent in the twelve months to June 2005 represents a whopping 62% increase, with paid for search making up the largest segment, at £192m - just over 40% of all online ad spending.
Cost per click has increased by five-fold or more
For companies who have been successfully using paid for search as a significant source of leads and sales, this is a huge potential problem. As revenue pours into the paid search market, the inevitable result is that more companies are fighting for the same search terms, driving the cost per click up and creating a serious impact on return on investment. For example, clients in the financial market have seen the average cost for key terms increase five-fold over the last 12 months. This is a common occurrence for popular terms in all of the big five advertising sectors including recruitment, finance, technology, transport & travel, and automotive, and is impacting heavily on online marketing budgets.
Is there any good news?
The good news is that the rise in ad costs is more than compensated for by the exceptional growth in consumer use of the Internet as a buying channel. Online shopping was expected to rise by 35% during 2005, to over £20bn, at a time when the High Street is reporting modest or negative growth. This means there is plenty of business to go after, with more and more experienced consumers happy to spend online. The question is: What can you do to increase you share of the online pie, without spending more than you need to in the process?
Strategies for value
At Spannerworks, we develop strategies for value - based on real data supplied by our own BidPro system - which enables us to analyse return on investment and run sophisticated bid strategies on behalf of our clients. Each client is different, but here are four key strategies that can help to maintain or even improve return on investment in a rising ad spend market:
1. Longtailing
This is the delicate art of easing away from popular generic terms to longtail terms. Our own research on 20,000 conversions across a broad section of clients in a six-week period, tells us that people searching on longer terms are more likely to buy. (The reason being that they are generally looking for something more specific.) The beauty of this is that although volumes are lower, the cost per click is significantly less, leading to improved return on investment. That said, the key here is not to abandon generic terms altogether - they are an important part of building brand recognition and consumer confidence - you simply need to manage these terms more carefully (see below). For example in the property market, you might move away from 'flat to rent (Name of Town)', to: 'flat to rent (Postcode)'. In London, this might mean over 100,000 terms instead of 20 or 30, but the result is a more productive campaign and better value in the long-term.
2. Day-parting
Using BidPro we are able to analyse the time of day that is most productive for each term with respect to sales rather than leads. For many products, lunchtimes with a time pressure on the user, result in an increased likelihood of a purchase. For some clients we day-part manage their exposure on expensive generic terms so they only appear when their potential to make a sale is at its highest.
3. Landing strategies
To maximise the potential of a positive outcome, you need to think about where the person clicking through will land on your site. Is it directly relevant to the ad you have run and is there a clear call to action? As well as making good sales sense, improving landing pages may also help reduce your bid prices: Google recently announced it will be adding 'landing page quality' to the factors it uses to set minimum bids for paid keywords in a move to improve user experience and penalise poor sites.
4. Automated cost per acquisition
We use our BidPro system to set-up automated cost per acquisition strategies to ensure that we only use terms that can deliver target return on investment. This needs frequent intervention and monitoring for maximum effect.
Of course, natural search is another strategy in improving return on investment. Many of our clients benefit from an integrated approach, whereby we reduce paid search as natural search visibility improves and inform natural search strategies through paid search results and analysis.
Whatever strategies you decide to use, the emphasis must be on quality data, analysis and management.
Charlotte Plumley is an Account Director on the Spannerworks Paid Search Team.
