On Monday of this week Microsoft (aka the former Atlas institute) released a study which stated that bidding on branded search terms is an overvalued and budget-wasting exercise. The study, which first appeared on Adweek, implied that bidding on your brand is a waste of ad dollars since users "intended to go to the site anyway" and that what ought to be done instead is to lower the bids and focus more on SEO. While we appreciate the due diligence that Atlas and its analytics team brings to the table, there are a number of assertions that cannot be supported by their methodology.
More than just a glorified Yellow Pages listing; competiting on brand
If a consumer wants to go to a specific site, the last thing the company wants is for its competitor to get in front of that consumer. Think about a person calling a 411 directory for the number to a local Dominoes Pizza and then, just before she is connected, getting an ad for Pizza Hut with a better offer; all she has to do is press "1" to be immediately connected. Dominoes would surely lose a few easy sales.
The Atlas study did not appear to take the above situation -- the potential hazards of major competitors bidding on branded terms (look no further than American Airlines' recent suit against Google about this subject) -- into account. From a DR perspective, if the competitor has a good offer, it could take away easy sales from a brand at a very small cost. The question is, would a brand rather pay a small cost per click to get that sale, or pay nothing and lose it entirely? From a branding perspective, having a competitor show as number one on a brand search can and does take mindshare, allowing a competitor to piggy-back on a company that has spent millions to build its brand.
The report also does not take into account that on Google, Yahoo! and some partner sites like AOL, the natural results can show as low as third under paid listings. The implications of the above scenario are magnified when paid listings show above natural listings. SEO is very important and can enhance paid (and vice versa). However, with as many as three paid listings appearing above a natural listing, there are now three competitors that could potentially take away sales and mindshare.
Paying top dollar on brand
Another false assumption is the idea that an advertiser must pay "top dollar" to show on searches for its own brand. With a good quality score, a brand would pay less, not more, than competitors bidding on the branded keywords for the number one spot. The quality score of Google and Yahoo actually makes it cost effective to bid on one's own brand, and makes it very expensive for competitors to take the top spot, making bidding on the brand just common sense. If a brand lowered bids in an effort to save a few pennies a click, not only would it lose the top position to a competitor, but it may end up paying more per click in the long run, since this action will adversely affect its quality score. Not taking this into account in the conclusions of the study is an important oversight that doesn't reflect how search marketing works.
Brand eats up budgets
Finally, it is a gross generalization to state that bidding on all or most brand terms would take up half a marketing budget. For some companies, brand words can take up a good chunk of the budget, but for these brands it's not about lowering bids, it's about raising awareness in the marketplace or building out more keywords to get the traffic the brand is missing. Just because a brand may be spending more at a given time does not mean you throw the baby away with the bathwater; it means that we as search professionals must utilize other tactics. For many other companies brand makes up less than half the budget, and moreover, a good quality score would actually make branded terms even more cost-effective. Furthermore, the cost that is associated with bidding on brand names is nominal compared to the cost of exposing the brand to piggy-backing competitors.
Conclusion
While we can appreciate the analytics that went into the report -- and Atlas has always been strong in this regard -- what we see is an example of the trees getting in the way of the forest. The analysis used for this report fails to take into account other variables that are part of the practice of search marketing. As a result, broad assertions were made that can't be supported by just data. Knowing how to work the numbers doesn't equate to irrefutable insight. Beyond its nominal appearance, the report does not conclusively make the connection between data analysis and how search marketing works in the real world.
David Singh is manager, search practice lead at Underscore Marketing. Read full bio.
