Maximizing Your Paid Search Asset

Are companies doing what they can to identify, nurture, and maximize the paid search asset? Here are some things they should be doing.

Can a well-honed advertising campaign be considered an asset?

A mature paid search campaign is an asset, in the sense that it’s a complex, diversified portfolio of laser-targeted advertising touch points (search keywords, and other relevant customer segments) that each come with their own expected return and the flexibility to bid higher or lower. The confidence levels in the expected outcomes can be assessed as well. What’s more, much of the asset is defensible, private business information known only to you.

Some of us underestimate the importance and value of this asset, because the experience of running a campaign may feel a little too virtual; like “playing marketer” in Second Life, on a platform for chills and thrills invented by Google. But many industries operate in “canned” environments analogous to playing a “game.” Whether it be in pharmaceuticals, airlines, financial services, or mining, companies nurture assets in government regulated environments, and environments constrained by certain rules established by cartels or monopolists, etc. And they work to understand and maximize their assets, in spite of not having ultimate control over the playing field.

To be sure, certain elements of the paid search asset are more speculative than others, just as the difference between owning a stake in land with some indicators of a possibly rich mineral vein in the vicinity, as opposed to owning a working mine with an expected life cycle, with the benefit of a history of years of demonstrated costs and revenues, paying royalties to the owners. Some mining companies (or resource-based mutual funds) are widely or strategically diversified among speculative exploration opportunities, growing but proven assets, and strongly proven but eventually diminishing assets. A keyword search advertising campaign can be viewed analogously.

Are companies doing what they can to identify, nurture, and maximize the paid search asset? What should they be doing?

Some Have Stumbled Into This Intelligently; Many Have Just Stumbled

Whether by design or by somehow stumbling into a winning formula, some great companies (large and small) have managed their paid search direct marketing assets as such from the beginning. I’d call these the visionaries.

Others have just stumbled.

Here’s an overview of the current state of affairs in a wide variety of verticals.

  • There are a handful of visionaries in every vertical who understand the long-term recurring nature of the business results that can be achieved once a keyword campaign is honed and perfected.
  • These visionaries not only prioritize paid search, but they front-load some of their investment and do plenty of testing so they can be sure to get there first.
  • The vast majority of digital marketers (non-visionaries) continue to treat the paid ads as an “expense”; many listen to the hopeful voices that tell them to build a nice website and hope, to cultivate word of mouth, to “get” social media, to be content with SEO (define) alone, etc.
  • The majority are setting early CPA (define) targets too conservatively, rather than going through a full optimization process and aiming to achieve ideal CPAs next year, not “yesterday.”
  • Many company owners personally manage their campaigns too long, thinking that it will be more cost-effective to run a skeleton campaign on their own, as opposed to hiring a specialist or agency. They may fall behind, underinvest, etc. as a result, and then find it hard to make up the lost distance in the “data asset race.”
  • In relationships with professionals in the field, non-visionaries may lowball, crowdsource, and defect from two-way-street behavior. In interactions with the search engines and publishers, they may try to bottom-feed or lowball on bids, only to be met with new relevancy requirements, baffling quality scores, and stuck accounts. As long ago as 2002, I called this approach “nibbling”; it is often a symptom of a weak business model or unaddressed fundamentals.
  • Some companies care only about getting leads at the right price, so they’ll pay tacticians for leads, forgetting that the tacticians keep the methods for achieving those leads inside a black box. You don’t own or control the flow in such cases.

The Crossroads Come Earlier Than you Think

It’s normal to feel disgust and despair when you first drill into “keyword rock” and come up with… rock, instead of ore. New campaigns are the worst campaigns; perfected campaigns are often impressive assets.

So, the business owner comes to a crossroads. Can this work or should we throw in the towel?

The following letter to a friend, Kyle, running a startup (in retail apparel) may illustrate what I mean. This company is positioned brilliantly, already receiving national media attention, yet after 30 days of a low budget paid search campaign he was already getting ready to throw in the towel. He wrote about how far away profitability seemed to be, concluding:

“If you were in my shoes, would you keep tweaking, confident that there is a way to make this a profitable sales channel, or would you pull back and devote resources elsewhere?”

It’s understandable that he is alarmed and uncertain. But when I see good fundamentals as well as profitable segments beginning to emerge, I’m never discouraged by seemingly weak early aggregate figures. Notwithstanding his anxiety, here was my response:

“From our standpoint and experience in the business I can tell you that your bleak-at-this-stage analysis (with respect) is completely wrong. In fact, there are bright spots in the account and with bright spots, there is strong potential.

Turning the corner? We haven’t even left the garage.

The CPA isn’t really at $73. In the areas that are bright spots, the CPA is a lot lower (even below $10 in some cases). That doesn’t count the fact that we have a long way to go to reach ad copy that is optimized, which in itself would overlay the whole campaign with a ~40% better conversion rate.

That definitely doesn’t count making the site convert better, which could be a 50% conversion rate lift over time.

The low budget, which gives us feedback in the form of only 2-3 sales per day, provides a brutal climate for optimization. We are left to extend our guessing period.

We can observe that very specific products with very specific search terms had a great chance of converting – the [blankety-blanks] and even the [ni-ni-ni’s]. The broader terms are currently stealing impressions away from those.

I recommend two changes to the current approach:

(1) Up the budget so we can turn the corner faster, with simple data analysis;

(2) Tilt the priority towards those highly granular products. The CPA’s here should start out closer to $20-30 and we can ensure we stay there by bidding down after the first couple of days to more cautious ad positions.”

I think a key phrase in Kyle’s question was “devote resources elsewhere.” In our experience with successful clients with similar profiles, we’ve rarely seen all that much “elsewhere” to “devote resources to” that is as appropriate or fruitful as paid search – unless you count conversion improvement.

I’ll conclude with some positive recommendations for the typical company reaching the PPC (define) investment crossroads. Back in two weeks for Part 3 of 3!

Originally posted on ClickZ – Maximizing Your Paid Search Asset