Businesses of all sizes can connect with potential customers using paid search, making it a core component of many marketers' mix. However, when it comes to paid search (and other forms of digital advertising, for that matter), many marketers rely on "conventional wisdom" over fact when making decisions. The result can be missed sales and increased costs. We took a look at one of the most common paid search myths -- position's absolute effect on conversion rate -- and busted it with cold hard facts.
Believing ads displayed in positions one or two will result in lower conversion rates, many paid-search programs avoid these top spots. The rationale behind this belief is that top-placed ads drive much higher levels of traffic, including a larger percentage of visitors who click without reading the ad, or who reflexively click on the first result they see.
Consequently, many marketers assume that a larger percentage of visitors who arrive via a top-two ad do so without intending to visit their site. Conversely, the thinking goes, ads displayed in position three or lower require searchers to be more deliberate when clicking; therefore, visits from those ads result in higher conversion rates.
The risk of believing
If you believe the myth, the best way to avoid wasted spend is to avoid the top two spots. Bidding keywords down to keep ads at or below position three is not without potential risks, however. What is the right bid to avoid the top two positions and still appear high enough to drive sufficient conversions to achieve your financial goal? Is the bid static, or will it change depending on market conditions? There may be times of the week, month, or year when top positions result in higher conversions, revenue, and profit. What are you losing by ceding the top spots to your competitors? If you avoid the top two positions, can you take advantage of changes in the marketplace? These are among the questions and considerations paid-search marketers must address; otherwise, they risk being the victim of conventional thinking.
Now, let's discuss how to address these issues and get to the bottom of the myth.
The reality of position vs. conversion
It seems reasonable, using the rationale cited above, that ads in positions one or two will generate a lower conversion percentage. The data, however, tell a different story. Yes, there are more impressions to be found in the top spots, and there are certainly more clicks to be had. And, contrary to the myth, there can also be a higher conversion rate. Consider the two examples below, taken from the same OptiMine customer:
Looking at both "Keyword A" and "Keyword B" examples, we see that the higher-position ad delivered conversion rates of 30 percent higher in one case and 51 percent higher in the other. So the myth has been busted -- but don't go bidding everything up to appear in positions one or two just yet. There's more to this myth.
What we're looking at here is a snapshot in time. While in this case "Keyword A" and "Keyword B" both performed better at higher positions, don't let that convince you that position 1.4 is always better than 3.7. In a market as dynamic as paid search -- where customer and competitor behavior changes daily, even hourly -- there are no absolutes.
In such a dynamic market, the relationship between position and performance can be very volatile. In this particular example, the keywords in question have a "day-of-month effect," meaning they are more likely to convert at certain times of the month. During high-conversion times, higher positions are warranted. Conversely, they should be bid down during low-conversion times, giving them a higher likelihood of being profitable regardless of the time of month.
The take away here is that the relationship of conversion rate to position is situational, as are so many factors in paid-search bidding decisions. When marketers make blanket decisions based on "conventional wisdom" or intuition, such as that higher positions lead to lower conversion rates, they risk driving down performance through missed sales and/or increased costs. With the many micro factors that influence each of the thousands or millions of keywords, there is typically no "one size fits all" rule of thumb. Marketers (or the software they use) must instead evaluate individual bidding decisions daily through the lens of their overall financial goal. It is fact-based data tied to one's goal, not myths, that drive better performance for paid-search advertiser.
Rob Cooley is CTO of OptiMine.
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