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Escalating Keyword Prices Differentiates the Next Generation of Search Marketer

Posted on Monday, March 22nd, 2010 by Print This Post Print This Post

Categories - Featured, SEM

Escalating keyword prices on Search Engines have become the bane of search marketers everywhere. In fact, Google has reported that by its broadest measure of CPC, which includes its content network, CPC has risen steadily through 2008:

The decline in 2009 is entirely attributable to the financial panic and resulting recession. The trend is still upwards in the long run. This price inflation is a direct result of several factors:

  • Moderating growth in US search query volume: According to Comscore, while worldwide search query volume grew 46% in 2009, US growth is less than half that, 22%. In addition, again according to Comscore, the US figure is largely unchanged from the year earlier rate of 21%.
  • More advertiser dollars are moving from other media to Search, with projections of doubled Search Marketing industry revenue: Forrester estimates US Paid Search Marketing to grow from $15.4 billion in 2009 to $31.6 billion in 2014. When some of this “new money” enters the market, bad spending decisions are inevitably made as experience is slowly gained and strategies adjusted to account for the different medium.
  • Search is building more mindshare as the runaway success of Google generates awareness of its platform: According to Neilsen Media Research, the Percent of Time spent in Media versus Percent of Ad Spend in Media is 3.6 for the Internet, and just 0.4 for newspapers, thus showing an over-allocation to newspapers and a similar under-allocation to the Internet. This dramatic imbalance sets up print media for a massive loss of revenue as advertisers find new ways to spend their marketing budgets. In fact, as a sign of things to come, Kantar Media confirms this in a recent study that shows advertising spend in traditional media like TV, newspapers, and radio plunging by 10%, 20%, and 22% in 2009. On the other hand, Internet display grew by 7%.

Sure enough, the high prices are starting to bite: Forrester Research says that two-thirds of marketers report that high keyword prices are their biggest challenge in paid search. In the very recent past, the easy answer was better and more sophisticated bidding. Many agencies and vendors built their practice on the sensible notion that a smarter bidding mousetrap would catch more search traffic. But that approach is now so widely used that it alone is inadequate to move the needle. So, what’s a savvy Search Marketer to do?

Though not entirely new to Search Marketers, they will have to sharpen their skills on keyword management, keyword testing and targeting. Agency partners will have to develop a deep understanding of the client’s business objectives, generate keywords that can assist in achieving those objectives, and then organize them into optimal allocations. Testing the efficacy of these keywords is the next course of action, followed by continuous refinement and alignment of the resulting campaigns with overall business objectives and strategy. When managing a small number of keywords, this management and optimization task is daunting but doable; at large scale, it is out of the question without powerful tools and sound methodologies that support an experimentation and feedback model.

Understanding and optimizing for Quality Score will also be an essential tool for the successful Search Marketer. Such an approach creates a virtuous cycle—the better a score, the cheaper the click, which liberates more marketing budget for increased ROI. Mastering and implementing a range of tactics are critical in improving Quality Score:

  • Effective keyword selection
  • Use of negatives
  • Match type refinement
  • Demographic targeting
  • Geographic targeting, particularly beyond just local

Again, at small scale all of these tactics can be implemented by a determined Search Marketer who has the self-discipline to tend to his or her campaigns relentlessly. But, at large scale, tools and effective methodologies along with best practices in the hands of seasoned professionals are the only way to address this problem.

Finally, a clearer and deeper insight about the targeted customer is essential in driving effective Search Marketing. Every business that bids on a given keyword in Search will likely have a different business model and varying ways of monetizing any resulting clicks. One way to attain competitive advantage in the marketplace is for a business to really understand the value of a customer, particularly if there is residual or lifetime value beyond the immediate transaction. Developing this persistent customer intelligence can assist in building better attribution models and multi-faceted ROI models. In turn, this understanding of customer value can help the Search Marketer refine the keyword strategy to further improve performance and reduce marketing costs. While conceptually straightforward, implementing Search Marketing campaigns that are informed by an end-to-end customer intelligence requires considerable skill and expertise among the business owners, agencies, and technologists.

Rising keyword prices are likely a fact of life for the modern Search Marketer. There is just too much value in those keywords for them to go cheaply! But by going back to the root of the business problem, and focusing on keyword management, Quality Score, and a holistic view of the customer, a marketer can bring business insights into play to reduce the effective keyword costs.

About Mark Looi

Mark Looi is a leading Search and Business Strategy consultant. He specializes in advising companies on consumer-facing Search Marketing and Product Development for the Web and Mobile. He brings a wealth of experience in technology, P&L management, business development, offshore development, mergers & acquisitions, business operations, consumer acquisition & marketing, new product development, and engineering to drive insights and value for his clients. For additional fun and excitement, he incubates and launches startups, utilizing very lean development models. Prior to starting his consulting practice, he was a General Manager and Partner at Microsoft, where over a 12 year stint, he built an SEO/SEM agency, ran the MS support site, launched MSN Alerts, led the MSN TV Internet on TV web service and built the MSNBC.com website. Mark also developed products at Adobe Systems. He graduated with a Master’s in Computer Science from Stanford University and a Master’s in Operations Research, also from Stanford. He earned a B.Sc., first class Honors, from the University of British Columbia. He is a multi-patent holder as well.

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4 Responses to “Escalating Keyword Prices Differentiates the Next Generation of Search Marketer”

  1. Melinda says:

    Great article, thanks.

    I manage AdWords campaigns for clients in Australia and while there are still some industries where keyword prices are low, there are some that are beyond the budget of a small business. I’ve particularly noticed it with IT and Financial Services.

  2. Jan says:

    Im impressed. I dont think Ive met annoye who knows as much about this subject as you do. Youre truly well informed and very intelligent. You wrote something that people could understand and made the subject intriguing for everyone. Really, great blog youve got here.


  1. plz tell me the top paying adsens keywords that work in pakistan ?
  2. uberVU - social comments

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