ellipsis flag icon-blogicon-check icon-comments icon-email icon-error icon-facebook icon-follow-comment icon-googleicon-hamburger icon-imedia-blog icon-imediaicon-instagramicon-left-arrow icon-linked-in icon-linked icon-linkedin icon-multi-page-view icon-person icon-print icon-right-arrow icon-save icon-searchicon-share-arrow icon-single-page-view icon-tag icon-twitter icon-unfollow icon-upload icon-valid icon-video-play icon-views icon-website icon-youtubelogo-imedia-white logo-imedia logo-mediaWhite review-star thumbs_down thumbs_up

What’s a Click Worth?


The attention search marketing is getting of late is reminiscent of our pre-dotcomer bubble burst days.

According to a statement made by CEO Ted Meisel last April, Overture is expected to reach one billion in sales this year. Just two years ago, Overture generated only 288 million in sales. This kind of success is proving that every Tom, Dick and Harry with the inclination has entered the paid search space.

Thomas, Richard, and Harrison are bidding and so are lots of other advertisers. The now famous March 2003 Piper Jaffray report, Golden Search, estimated the industry would be worth $7.0 billion by 2007.

The fallout from this increase in advertiser activity is skyrocketing click costs. Did anyone notice these increases?

Recently, comScore Networks and the IAB completed a research initiative that traveled across the country. This study showcased observed conversion habits of users clicking on paid search results as compared to unpaid search results. In two key industries, Travel and Finance, the ratio of clicks to sales was measured. To what extent do higher click costs affect the value of conversions?

Key data points from these two earth-shattering studies can work in harmony to help unravel the click cost mystery in an attempt to answer the ultimate question: What’s a click worth?

Tipping Point

At a recent trade show, the Piper Jaffray report was referred to as the search industry’s tipping point. Assuming this is a reference to Malcolm Gladwell’s book of the same title, The Tipping Point is defined by Malcolm as three factors working together to achieve a much larger effect. One, contagiousness, a.k.a. lots of people doing the same thing at once. Two, the effect little things have on a much larger scene. The third factor in a tipping point requires a dramatic moment when everything can change.

Contagiousness may be the key factor in driving click costs though the roof. Golden Search provided click cost analysis across some forty keywords on Overture for 2002. Among phrases that saw staggering increases in 2002 were PDA at 184% and Entertainment at 149%. Only seven of the keyword click costs showed a decrease over this period and even then, none were in triple digit percentage points.

Little things like click costs can really initiate a change. Competitive activity drives click costs on bidding sites and fixed sites analyze click costs on top sites to set the value of clicks in their rate cards. Through analyzing all forty keywords in the list, the average increase in click costs was nearly 50%. Can you imagine the effect on our economy if inflation increased that much? Astounding.

And it’s all happening so fast.

Research Multiplicity

The comScore study unleashed some pretty significant findings for search marketing though I’ve heard a decidedly negative buzz relating to some of the study’s possible shortcomings. In the bad news, then good news format, I have this to say.

Critics of the report stipulate that it did not distinguish between paid search formats. For example, the Ask Jeeves branded response ad unit was included with response rates. Close, but no. This ad unit is a bit of a departure from your everyday paid text link. The second complaint I’ve heard is that Looksmart links (that could arguably be called editorial listings since they typically fall below sponsored results) were thrown into the sponsored search frappe. The reality of the situation is that the Looksmart listings were not included in the sponsored link test cell.

Hearing grumbles like these makes me a little cranky. Yes, one could argue these factors might send results data in the wrong direction. Anyone who has ever worked with research data and had to present to the general marketing public is faced with the challenge of making the information both digestible and convincing. Sure, they could have gone into great detail as to the unique attributes of each search-listing format and had a two hundred-slide presentation thereby losing the audience and abandoning any hope of educating anyone about anything.

For our purposes, these criticisms will be categorized as captious and their position nugatory. What the study did offer was an educational perspective on paid search with big brands like Expedia, United Airlines, and American Express. The focal point was response rates in travel and finance industries and ultimately the conversion rates for those two category killers.

Analyzing search acquisition costs can leave you standing in a large empty room screaming in vain for tech support. It doesn’t have to be that way.

Velvet Ropes Part, Champagne Flows from the Heavens

The forty keyword costs depicted in Golden Search were accompanied by average cost-per-lead comparisons for other forms of direct marketing. Search ranked lowest at $.29 while banner ads were in the $2 range.

However, if you take the average click or lead cost for the forty keywords provided in the report, the number is in the neighborhood of $1.33 for the first quarter of 2002. Given the fact that click costs rose about 50% on average, the number would have reached $2 by the fourth quarter of 2002. A $2 cost-per-lead projection seems a bit more practical than $.29. The lower number includes the universe of search, i.e. hundreds of low traffic, low bid keywords that are otherwise undesirable for advertisers.

The comScore study provided credibility to an otherwise unbelievable new metric for search. In this immediately accountable cost-per-click world, advertisers rarely take into account indirect conversions. For all intents and purposes an indirect conversion is a sale or desired action, which occurs after the initial click and requires the user to return to the site to take said action sometime in the future. According to the study, the travel category seemed most susceptible to secondary or indirect conversions. Travel showed .7% immediate conversion rate with an additional 1.5% coming from secondary conversions.

Now that we have all the pieces to the puzzle, we can assemble some projected costs and return figures accepting a 2.2% conversion rate as a known. In the chart below, you can see the impact a rising click or lead cost can have on the return of a $20,000 spend. The first hypothetical advertiser generates $100 in every conversion. The revenue figure is realized by multiplying the number of clicks by the conversion or sales rate, then multiplying the product by the dollar amount achieved in the conversion. The advertiser can then calculate a return by dividing the total dollars into the media spend and converting the final number to a percentage.

The goal of this exercise is to find the click cost that works for your campaign. In this chart, I have reduced per-conversion revenue by 50%. As you can see, this has a pretty significant impact on the return. In this instance, the advertiser must maintain roughly a $1 click cost.

Search Marketing Harmony

Of course, all of these calculations will vary greatly with each campaign. Above all an advertiser must have a very good handle on how much money is made with each conversion or desired activity for the initiative. If every advertiser dug into effectiveness measurement in this or a similar manner, click costs might not rise into oblivion so quickly. I can dream about that world, can’t I?

About the author: iMedia search columnist Kevin Ryan’s current and former client roster reads like a “who’s who” in big brands; Rolex Watch, USA, State Farm Insurance, Farmers Insurance, Minolta Corporation, Samsung Electronics America, Toyota Motor Sales, USA, Panasonic Services, and the Hilton Hotels brands, to name a few. He is currently Director Market Development of IPG’s Wahlstrom Interactive where he provides guidance in directional online marketing to Wahlstrom’s prestigious list of clients and sister agency brands.

Return to Page 1

Harris: Consumers are generally more interested in using the internet to help them decide on makes and models than in focusing on particular dealerships. And moreover, they can get autos-related lifestyle tips and information from any of a number of sources, online and off. How do programs like Loyalty Driver change the game and give more power to the dealer?

Epro: E-mail marketing is the essence of the consumer having total control. If the dealer sends emails that aren't relevant or high quality, the consumer can tell the dealer to cease all email communications. E-newsletter programs like Loyalty Driver change the game by allowing dealers to consistently send quality content that results in extremely low opt-out rates and continuously high open rates.

For example, the July e-newsletter may not contain anything the subscriber wants to buy, so they read the lifestyle content. However, August comes around and that subscriber needs a good used car for his daughter who is heading off to college. He opens the e-newsletter, sees used car specials and clicks through. And while consumers can find lifestyle content online, Loyalty Driver delivers it right to their in-box, making it more likely they will click on dealership messages, "schedule a test drive" buttons or links to the dealership website profit centers -- new, pre-owned inventory, schedule service -- instead of heading to a search engine.

Harris: Are there any key points that dealers need to make sure they communicate when they incorporate an e-newsletter program such as this into their marketing strategy?

Epro: When a dealer incorporates a program like Loyalty Driver into their marketing strategy they need to make sure and communicate the long-term goals of an e-newsletter to their entire dealership team, emphasizing that an e-newsletter is not a hard-sell, one-time piece like most promotional marketing items. A dealer's sales team is probably used to "one-offs" that only market discounts or specials. The e-newsletter is about cultivating a loyal customer base for a long-term relationship that meets every customer need: coupons and specials when they need a vehicle or service and lifestyle articles to keep them interested when they don't, so that they'll always think of you first when a need arises.

Harris: Your e-newsletter service refers to the concept that a customer household can have a "lifetime value" of $350,000. Can you break this down for us?

Epro: Lately, I've been seeing numbers even higher than $350,000. According to an IBM Institute for Business Value analysis, a customer's household loyalty can even be over $670,000. When Dad goes and buys a new car, what about all the service he needs to have done on that car? What about when Mom's car needs to be replaced? Or, when Junior and Sis both need cars? Having a relationship with the household will make it that much more likely that all those vehicles and services are purchased through that dealership.

If you imagine a customer relationship that spans over 30 years, you can quickly see the opportunities through family members and friends, the service and parts dollars brought in over the length of the relationship and the positive word of mouth that comes from a long, established relationship with one customer. Think of it as ripples from a beginning wave in a pond. You have a touchpoint with one customer that leads to many other opportunities. The successful dealer takes one touchpoint and multiplies it into several touchpoints through loyalty tactics like e-newsletters.

Harris: What are the biggest challenges you have experienced in getting dealerships on board with your program?

Epro: Our biggest challenge has always been getting to the dealership's general manager or owner. Once we do that, they almost always sign up. The massive ROI we deliver becomes immediately obvious once we've been able to sit down with the appropriate people at the dealership.

Jodi Harris is managing editor of iMedia Connection's Driving Interactive. Read full bio.

Return to Page 1

While more and more readers are turning to other outlets including cable television, online news sites, blogs and news aggregators like Google and Yahoo News, newspapers are still a profitable business, though much of that profit is in danger thanks to factors that are not relevant to interactive, such as the rising cost of fuel, labor, ink and paper.

Today, as the newspaper industry struggles to compete with the very portals it feeds, it has become increasingly difficult to maintain profit levels of 15-20 percent without implementing cost-cutting measures like the massive layoffs at numerous respected newspapers across the country.

Of course, publicly owned newspapers are beholden to the demands of Wall Street, where investors measure their value based on how much money they make and how much money they will make in the future. Nearly 3,000 full-time newspaper jobs have been lost so far this decade, according to the Project for Excellence in Journalism. Other newspapers have shut down press rooms and closed overseas bureaus. Many of these jobs have moved to news-gathering organizations online, and in many cases, with the same mastheads.

When do newspaper websites catch up?
Thanks in part to companies that provide services and one-stop shopping for all local online publishers through technology platforms, online revenue at newspapers continues to grow at an average rate of more than 30 percent a year.

When you pick up your local newspaper, the majority of the national ads you see were all placed through national buying services, and until only recently, those same national advertisers had no simple way to reach those digital newspapers. But that's changing and the newspaper industry is competing once again and gaining serious ground, as evidenced by its renewed growth, increased technological innovation and investments in online editions.

Take a look at the fantastic Frontline special to learn more about the industry's challenges and more about what will drive interactive in the years to come. Newspapers aren't going anywhere, but the portals that have skimmed so many ad dollars from the top at the expense of newspapers, their brands and many of the journalists that create that brand may be in for a surprise in the years to some. 

As networks proliferate, their stratification and controversies -- like the Ann Coulter site situation when blind networks saw their branded clients become furious about where their ads ran -- will only drive more business back to where the content was derived: newspapers.

It's not going to happen this week or this year, but it will happen.

Shawn Riegsecker is CEO of Centro, a provider of platforms and services to help agencies easily and effectively buy local online media. Read full bio.

Google now gets more than 60 percent of U.S. search queries, and Yahoo gets about 20 percent; thus, the majority of searches originate on major engines. The top three (Google, Yahoo and Microsoft) are called first-tier engines because they deliver high traffic levels, good conversion rates and the best reporting tools.

Second-tier engines include the smaller niche, vertical and local search engines and directories that are not so well known or popular. These engines typically have less traffic than the majors but offer less competition for keywords and cheaper keyword prices. While second-tiers may get less traffic, even 1 percent of search market share can equal $100 million in revenue.

There are a number of pros and cons to advertising on second-tier search engines. Selecting the right second-tier for your search campaign is key to success, so it's important to investigate every angle, including the engine's user base and income level, reporting tools, campaign management tools and click fraud protection policy. Possible candidates should be tested for ROI before committing large sums of money.

Advantages of second-tier engines
The top benefits of second-tier search engines are as follows:

  • Lower per-click costs

  • Less competition for competitive keywords

  • Highly targeted audiences

  • Quick and easy ad copy testing

  • High touch customer support

  • Additional source of traffic and conversions

While the main advantage is cost, you can also get some great contextual and behavioral offerings for a fraction of what you might pay on first-tier engines. For example, if your target audience is NASCAR fans, you might try advertising on Kanoodle, where your ads appear on a network of search engines and other popular sites like CNET's Search.com and the InfoSpace properties, including Mamma, WebCrawler and Dogpile.

It is important to define your campaign objectives clearly on second-tiers, setting budget restrictions and a timeframe for determining campaign success.

Most second-tiers give you the option of pausing a campaign to take advantage of working hours or click volumes, which can be advantageous for smaller businesses. You can log into your PPC account in the morning, check the previous day's activities, turn on the accounts when you expect the bulk of inquiries and then pause the account when volumes taper off.

Disadvantages of second-tier engines
The top disadvantages of second-tier search engines are:

  • Less traffic volume

  • Lower conversion rates

  • Lower traffic quality

  • Higher click fraud potential

  • Less powerful reporting tools

  • Aggressive sales reps

The most frequent complaints are low traffic volume, low conversions and low-quality traffic. However, you can compensate for reduced traffic volume with a lower cost-per-conversion if traffic converts well, which happens when you test and select your best performers.

While a major concern on second-tiers has been click fraud, many now provide click fraud protection. For example, ABCSearch, 7Search, eZanga and many others offer anti-fraud technology with AdWatcher and Traffic Advisors.

Note that the disadvantages above do not apply to all second-tiers. Some provide robust reporting applications (e.g., Miva), while others provide great traffic and conversions (e.g., Business.com).

It is important to know what a second-tier's unique selling points are, and the best way to find out is to ask a sales rep. Stay away if they don't provide this information.

With so many second-tiers to choose from, it's important to select those that provide the best performance. Your task is to research, test and find the winners that deliver qualified leads and conversions. Ask questions like:

  • What target audience do you serve?

  • How do you define a click?

  • Do you monitor and reimburse for click fraud?

  • Do you give a signup bonus?

  • Do you require a minimum deposit; if so, how much?

  • Do you require a minimum spend; if so, how much?

  • How many unique visitors do you get monthly?

  • What are your visitor demographics?

  • Do you have a content network; if so, can I opt out?

  • Do you have pay-per-call, video or other ad options?

  • How robust are your bid management and reporting tools?

  • Do you have testimonials from people I can contact?

  • How easy is it to reach an account manager?

After satisfying the above questions, use the tips below when planning and managing your campaigns.

  • Campaign goals. State your campaign goals clearly. For example, you may want to focus your ads on selling products or services, promoting an event, gaining registrations or boosting exposure for your blog.

  • Superior ad copy. Create relevant, emotional headlines to get top performance.

  • Precise landing pages. Next to the ad itself, your landing page is crucial for success. Know where you want visitors to land and drive them to a very specific landing page that delivers on the promise of the ad.

  • Demographics. Research the second-tier engine's audience and income levels.

  • Budgeting. Limit your spend and determine ROI.

  • Testing. Allocate a testing budget. Check conversions and ROI before making substantive commitments on second-tiers. The amount of your test budget will depend on company size, PPC budget, number of keywords and keyword competitiveness, etc. If your product or service is not too competitive, you might be able to test for $100 or less.

  • Campaign management. Use campaign management and reporting tools to track your conversions and optimize your keywords, ad groups and campaigns. Check availability and flexibility of tracking tools on second-tiers.

  • Click fraud. Research click fraud protection and reimbursement policies.

Note: The above questions and tips also apply to contextual and vertical search but are not repeated on the following pages.

Most search engines provide advertising on content networks, whereby your ad is displayed alongside content on partner sites for click-through to your landing page. Some second-tiers offer excellent content networks. For example, Business.com has a content network that includes Forbes, BusinessWeek, Hoovers, Financial Times and Entrepreneur -- excellent exposure for a business and finance target audience.

Another good example is MIVA, with a content network that includes both text ads and inline ads on a network of sites including CNET, InfoSpace and Search.com. This might work well if you are selling electronics, software or technical products and services.

There are many details to be aware of when it comes to content networks on second-tiers, so you must study the interface and know the rules. For instance, PPC campaigns are usually automatically opted into the content network on second-tier engines. So if you don't want contextual search, you must opt out.

Advantages of contextual search
Top advantages are lower click costs, less competition and targeted audiences. The cost advantage is greater because keywords on content networks cost less than those on search engines. While you might get fewer conversions, the campaign will likely yield a good ROI.

People spend more time on content sites than search engines. The exposure of your product and website in online content has high value, especially on popular sites. Visitors reading the content online already have a high degree of interest in the topic; thus, if your ad is relevant and catchy, users will likely click through to your site or bookmark it for later consideration.

You can get better visibility at lower cost with contextual search. Content ads are not as competitive as search engine ads because there is more click inventory on publisher sites than on search engine results pages (SERPs). You get less clutter, as content ads are usually displayed in groups of three or four, so your ads will stand out more than in the SERPs.

Disadvantages of contextual search
Content ads provide less traffic and lower conversions than search engine ads. Additionally, the click fraud potential is higher. If your contextual campaign is on second-tiers, the reporting and campaign management tools are not as robust as those provided by first-tier engines.

Conversion rates are lower for contextual search because sometimes ads appear on irrelevant pages and get bad clicks. Additionally, the ads may not distract attention from the site content. Issues of timing and readiness to buy are also a factor. Because contextual ads are displayed on publisher sites through the search network distribution system, they don't display as quickly as ads displayed directly in search results. That lowers conversion rates.

Prospects reaching your site from a search engine ad are likely ready to buy because they are actively searching keywords, looking for the products and services queried. However, prospects viewing your contextual ad are likely reading about a related topic. They might click through or bookmark, but are not likely to make a purchase.

Branding is a top marketing objective. It makes sense to use content ads for branding rather than direct response because of the audience's mindset. Users are not actively searching for your product or service but encounter your ad while reading related content. Therefore, contextual ads require different creative, keyword lists, landing pages, bidding strategies and ROI goals than ads on search engines because you are reaching more passive users at an earlier stage in the buying cycle.

Keyword selection is highly specialized. Rather than target keywords describing your brand, product or service, your list should include words that appear most frequently on the pages where you want your ads to appear.

Copy in your ads must stand out and distract with a clear call to action. Use special offers and promotions. Create a sense of urgency with time-sensitive appeals. Test and retest copy. Use your ads to leverage the interest built up through the content on the page.

Test search engine and contextual campaigns separately to adjust different campaign elements depending on performance. Develop competing contextual ads for different search engines to identify winners. Don't test before or during holiday shopping seasons, as results would be skewed.

Contextual advertising can expose your brand or product/service to thousands of prospects you might not otherwise reach, but careful crafting and testing is required for success.

Vertical search engines (VSEs) are specialized engines and directories providing search results from content databases related to a specific industry, geographic area or topical subject. Vertical search includes local search, topical search (e.g., travel, soccer, hobbies, etc.) and B2B industrial search. The information below refers to topical and B2B industrial search more than local search. For detailed information on local search, see "Strike business gold in local search."

As content on Google and Yahoo increases exponentially, it becomes more challenging to find relevant results in major search engines. In 2006, Outsell reported a 31.9 percent failure rate among business users when researching topics on general search engines. Since then, vertical search engines have increased in number and popularity. This makes VSEs an excellent venue for additional sources of traffic and conversions.

Advantages of vertical search
Vertical search can give you more leads for less money. As top ROI and positioning becomes harder to achieve on general search engines due to keyword competition, marketers get better rates on VSEs -- an excellent way to get brand exposure for attracting new clients.

If your product requires direct response, users searching on vertical engines are closer to making a purchase decision. VSEs frequently advertise on major search engines, bringing additional traffic and potential customers to your site.

Vertical search engines provide more advertising options than you'll find on general search engines. This includes banner ads, email blasts, sponsored placements, blog posts and industry newsletter ads.

Customer service is excellent on VSEs, and many provide help centers that take you through the online advertising process.

Users can reach highly targeted audiences in smaller databases that provide first-hand knowledge and information within the industry or niche.

Disadvantages of vertical search
Despite the advantages listed above, many VSEs fall short in attracting users. Why? Research from E-consultancy-Convera (2008) shows 38 percent of respondents don't always find a good vertical in their field, and 32 percent said vertical results were not comprehensive enough.

While 93 percent of respondents said they were "very" or "quite likely" to use a vertical in their field, the majority (91 percent) said they simply rely on major search engines. Only 7 percent admitted using a vertical engine several times a day. Interestingly, only 7 percent of respondents rated vertical results as "excellent" versus 27.5 percent that gave top marks to general search. It would appear vertical search needs to improve results as most respondents rated VSEs as "good" or "average."

As long as general search is good enough and online habits die hard, it is difficult to move most users beyond Google.

It is important to research the engine to ensure it actually targets your industry or niche. Ask about the size of the index (i.e., the number of product and service classifications). It is also important to test the site for ease of use. If you find it hard to use, chances are potential customers will, too.

Index size is a good indicator of success, as the larger the classification system, the more companies, products and services will be listed. User numbers are also higher with larger index sizes, making it more likely your ads will be seen.

You can find appropriate vertical engines for advertising your business in DMOZ, the Yahoo! Directory or NYPL.org. Once you develop a list of engines for your target audience, you can discuss your advertising options with an ad sales representative.

VSEs provide a variety of ad options, including PPC ads on the engine or the content network, cost-per-impression (fixed rate based on x-number of page views), cost-per-action (pay for conversions) and fixed fee (flat rate for specified actions). You can test the different options yourself or take the advice of a reputable VSE rep who can advise which options are best for your business.

There are many good paid search advertising opportunities on second-tier engines, content networks and vertical search engines. However, one must weigh the advantages and disadvantages in finding the best sources of alternate search traffic. Once you do your homework, the use of these ad vehicles can increase your marketing ROI with more visibility, lower keyword prices, less competition and more traffic and conversions.

Claudia Bruemmer is a freelance writer-editor and internet marketing consultant.

Look before you launch

If your app, service, or product isn't optimized from the start, you'll quickly get left behind. Data science lets you test the waters, see what works best for your audience, and determine if you're ready to launch. Do this right, and you don't even have to be first.

Case in point: social gaming monolith Zynga. Many of the popular games they developed weren't the first of their kind to market. But they performed better. Why? Zynga embraced data science early on. So did other leaders in the space, like Kixeye, Gaia, and PopCap. Because it had a vastly more rigorous understanding of its users and their products than the competition, Zynga was able to optimize products and drive users faster and more efficiently, ultimately surpassing other similar apps. Now it dominates the social gaming market on Facebook, based largely on its edge in analytics.

Think long term

In the new world, where data science rules, it's not just about optimizing by marketing channels based on a single conversion event. It's now possible to measure and optimize marketing programs by understanding how long users were inside an app; whether or not they invited friends, shared products, or entered an email address; and every other action taken over a user's entire lifetime. We look at this as it's happening, so there's no more waiting two days to receive a report. This means you can do much deeper custom segmentation of your data, and you can fine tune your marketing to target more of the people that have the highest likelihood of monetizing long term. True predictive lifetime value modeling is finally here, and it is revolutionizing the way smart marketers consider how to optimize marketing spend way beyond just a single transaction.

At the end of the day, data science gives you a really good understanding of ROI at a very, very granular level. It's all about tying your acquisition data to your monetization data, and everything in between. We help you see the signals, so you can make better marketing decisions.

Companies that don't look for the signals are making a big mistake.

Josh Williams is president and chief science officer at Kontagent.

On Twitter? Follow iMedia Connection at @iMediaTweet.

"The economic downturn chart" image via Shutterstock.

Kevin Ryan founded the strategic consulting firm Motivity Marketing in April 2007. Ryan is known throughout the world as an interactive marketing thought leader, particularly in the search marketing arena. Today's Motivity is a group of...

View full biography


to leave comments.