Languages and Locations

You are able to target your campaigns, so you know that the trafficThis refers to the visitors that visit a Web site. you are getting is relevant to your product. This is known as geotargeting.

You can choose the language of the search engine and the location. For example, you might only want your advertisement to show to English searches in Asia, or to English searches in London. Targeting your advertisement means that you won’t pay for traffic you don’t want.

Bidding and Ranking

Advertisers need to determine the maximum they are willing to pay for a click on their advertisement, and they need to decide this for each keyword they enter for an advertisement. This bid is the maximum CPC (cost per click), or max CPC, that the advertiser is willing to pay for the click.

However, this will not necessarily be the CPC that the advertiser must pay for a click. Every time a search query is entered, the search engine runs an auction to determine the placement of the advertisements where advertisers have bid on that search term. This auction is known as a generalized second price (GSP)Auction type that search engines are modeled after. auction, which is a variation on the Vickrey auction.

In the GSP auction, each advertiser will pay the bid of the advertiser below him, plus a standard increment (typically $0.01), for a click on the advertisement.

Say three advertisers, A1, A2, and A3, bid $2.50, $3.00, and $2.35, respectively, on the same keyword. The search engine has set a minimum price of $2.05 on that same keyword. Figure 7.6 "Example of Advertisers Bidding on the Same Keyword" shows how the advertisements would be positioned and what they would each pay for a click.

Figure 7.6 Example of Advertisers Bidding on the Same Keyword

When it comes to rankingProcess by which search engines display Web sites so that the most relevant Web sites appear on the top. Search engine optimization is a technique by which high rankings may be obtained., of course, it’s not quite as simplistic as that. As well as the bid an advertiser places on a keyword, the search engine will take a number of other factors into account. In the case of Google AdWords, this is known as Quality ScoreGoogle’s basis for determining the minimum bids for keywords, based on relevancy and historical data..

The Quality Score is determined by the following, among other factors:

• The relevance of the keyword to the search term
• The relevance of the advertisement copy to the search term
• The relevance of the landing page to the search term
• The historic click-through rate (CTR)Clicks divided by impression percent. of that advertisement

Search engines look at factors such as relevancy to try to ensure that it is not just having deep pockets that can land advertisers the top spot. Search engines need to ensure that users find the advertisements relevant, otherwise they’ll be less likely to click on them—and no click means no revenue for the search engine.

Conversion Rates and Click-Through Rates

Figure 7.7 A Heat Map from Eyetools.com That Shows Where Users Look on a Search Engine Results Page (SERP)

Source: Heatmap generated by Eyetools, Inc.

Studies repeatedly show that those advertisements nearer the top of the page (so the best ranked) attract the highest CTRs (click-through rates). They get the most clicks. And the clicks cost the advertisers more.

Looking at the heat map, you can see that getting in the blue box on Google will most likely generate even more clicks on an advertisement. You might think the more clicks the better, but is this necessarily the case?

Being in the top position means you will pay more per click. Many clicks at a higher price may use up your budget quickly. Also, many people click on the top advertisement believing it to be the top organic search result—often without reading the advertisement text.

Advertisers need to consider what a user does after clicking through to the advertiser’s Web site from the search engine. When planning a PPC campaign, it is therefore crucial to set up the goals of the campaign and make sure that these are being met. You can use your analytics package to set these up. With a goal set up, the advertiser can track how many of the users that click throughA click on a link that leads to another Web site. to the Web site follow through to that goal. This is called a conversion.

Goals can be any of the following:

• Buying a product
• Filling in a form
• Downloading a white paper
• Sending an inquiry
• Booking a flight

We know that the CTR of an advertisement is the percentage of clicks divided by impressionEach time the advertisement is shown..

The conversion rate of an advertisement is the percentage of conversions divided by click.

As the advertiser, you also need to know the value of each conversion. You need to know this so that you don’t pay too much for your clicks, and so that you bid to have the best CTR for maximum return on investment (ROI)The ratio of cost to profit (e.g., advertising spending as a percentage of the revenue that it generates)..

Figure 7.8 How to Adjust Bidding Strategies Based on Business Principles

Figure 7.8 "How to Adjust Bidding Strategies Based on Business Principles" shows how you might adjust bidding strategies based on business principles such as the following:

• Example A. Bid on a keyword with phrase match.
• Example B. Bid on the same keyword with phrase match, but bid for a higher position. The conversion rate of the Web site remains the same, but because of the higher CPC, the CPA (cost per action)Paid when a certain action is performed by a user. increases, although there are more conversions.
• Example C. Bid on the same keyword, but with broad match this time. Because the traffic is less targeted, the conversion rate on the Web site is lower. This means that the CPA increases again.

The campaign needs to be run according to business rules. A PPC campaign can aim for maximum conversions, but this is usually at a higher CPA.

Budgets

As well as deciding on your CPC bids for your keywords, you are able to determine the budgets for your campaign. You can set daily budgets, monthly budgets, or no budget. Once your budget is reached, your advertisements are paused, so you can be sure that you never overspend. If you are concerned about overspending, you can set a daily budget. However, this can mean that your advertisements do not run as often as you would wish them to.

The different advertising platforms offer advanced bidding options, all aimed at helping you to run your advertising campaign better. You can bid for placement on the search engine results page (SERP)The actual results returned to the user based on their search query., or you can bid based on how much you are willing to pay for a click. You are able to bid for advertisements during certain times of the day only, called scheduling.

Which Platform Should I Choose?

There is some theory that different platforms are better for different industries. For example, some believe that Yahoo! fares better than Google on travel advertising. However, this is subjective, and most large advertisers will run PPC campaigns on a number of platforms. As with most things in eMarketing, it is all about testing.

There are some small differences with each platform in terms of editorial policy, and each system has a different user interface. Google AdWords, perhaps the most well known, allows users to transact in the currency of their choice and also offers training programs and certifications.

Google AdWords also currently has the best geotargeting worldwide, although geotargeting is offered by both Microsoft adCenter and Yahoo! Search Marketing.

The Long Tail

Google has estimated that 50 percent of searches are unique. This means that the sum of unique searches is about the same as the sum of nonunique searches. Looking a little more closely at search terms will show a small number of high-volume searches, and then a large number of lower volume searches stretching out to those unique searches.

Figure 7.9

In the long tail, the sum of the low-volume searches matches the high-volume searches.

This is sometimes referred to as the long tail of search. Figuring out those low-volume, niche search terms can do wonders for a PPC campaign. Generally there is not much competition for those search terms, and the search term itself is very targeted.