Search engine marketing (SEM) is exploding within the online advertising industry and pushing advertisers in a whole new direction. According to Safa A. Rashchy, managing director and senior Internet analysts at Piper Jaffrey, SEM—the biggest component of online advertising—generated sales of $4 billion in 2004, up from less than $1 billion in 2002, and is projected to grow to $5.5 billion in 2005. SEM campaigns play a strategic role in diversified, broad-based advertising and marketing campaigns.
Advertisers, recognizing the effectiveness of SEM, are aggressively pushing up the prices of keyword advertising in bidding wars. The more prices rise, the more results advertisers demand. That challenge is pushing SEM firms to strategically invest millions of dollars in tracking the effectiveness of SEM advertising. That spending will continue so that they can push the envelope even further to ensure the success of clients’ online campaigns.
SEM is priced on an auction basis, and it is important to understand how keyword pricing changes over time. The SEM industry is delving into which keywords are more effective and which less. This is registered in databases at various SEM specialty firms and constantly updated and changed.
This initiative is critical for clients to quickly realize significant cost savings. For example, an automotive client generating sales leads for dealers needing to bring in more consumer traffic bid on both generic car-dealership keywords and keywords relating to specific makes and models, such as “Nissan Maxima” and “Honda Accord”. Through tracking and analysis, the SEM firm determined within a few hours that the auto-dealer keywords were attracting twice as many sales leads as those involving makes and models. The campaign was immediately shifted to those keywords, substantially improving its effectiveness.
This scenario occurred for several reasons. For one, people interested in purchasing a car are looking for a dealer. They may already know what kind of car they want and would like to see what specific dealers have to offer: test drives, different prices, special promotions, etc. Consumers who clicked on “Nissan maxima” might merely have wanted a look at the car and its features; they might not have been ready to take that next step and talk to a dealer.
The complexity of search engine marketing is the drive behind continuous efforts to improve processes and tracking to ensure the success of campaigns. With Web site analytics, the odds of turning a casual browser into a paying customer are substantially increased by tracking whether someone clicking on an Internet advertisement actually does become a customer. The point when that viewer leaves a Web site is also tracked, so when those browsers ceased to be potential buyers also becomes a data point.
One can break that online automotive experience above into a three-step process and measure those steps for their strengths and possible areas of improvement. The first step is clicking on the ad; the second is answering a sizeable field of questions; and the third is making the decision to purchase a car. More than 95% of the time, potential buyers left the Web site at the second step, so that’s where improvements were indicated. Potential buyers were being asked to answer more than two dozen questions, ranging from their names and contact data to the number of doors they wanted on a car, and color, trim and engine parameters. That was too many questions, asked too soon in the decision process. It turned off prospective customers, who typically left the Web site without completing the questionnaire.
Through Web site analytics, the most frequently ignored questions were determined, making them obvious candidates for deletion. Those questions were instead split off to a subset and put into multiple pages or “screens”. As a result, the client’s abilitiy to convert visitors into customers was substantially increased.
Predicting SEm results as accurately as possible is a standard that the industry is constantly striving toward. The better and more advanced the tracking, the more effectively that factors such as seasonality can be used to produce success. For example, keyword prices on certain search engines for flowers and related gifts began soaring by 40% to 60% five days before this past Valentine’s Day. With information like that, clients should be able to launch better SEM campaigns next year, by going to the right search engines and side-stepping aggressive keyword bidding wars.
While SEM is growing exponentially, it still represents only a sliver—less than 2%-- of the $350 billion spent annually in the American advertising market. SEM may not be the centerpiece of marketing campaigns, but it clearly will continue to grow, partly because traditional advertising and marketing venues are slowly aligning with SEM. Huge companies are beginning to realize that they should support traditional TV and print advertising campaigns with an SEM campaign. A TV campaign for a General Motors truck may strike consumers’ fancy, and as a result many of them will go to Google or Yahoo in search of additional information. If GM doesn’t support that ad campaign with SEM, they could easily lose a portion of those Internet researchers to competing brands that do practice aggressive SEM. The irony is that those conversions would be a result of GM’s TV ads—and the company would never even know it.
Matt McMahon is executive vice president of corporate business development at Fathom Online, an SEM consulting company based in New York and San Francisco.
