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Wister Walcott is the co-founder and vice president of products at Marin Software. Walcott is an experienced technology executive with proven sales and marketing expertise.

Prior to Marin Software, Wister was vice president of marketing at Composite Software, an innovative analytics middleware vendor. He also served as vice president of marketing at Pilot Network Services, an Internet security provider that went public in 1998.

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Spend More, Spend Better … See ROI Rise

Written on
July 28th 2008
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by Wister Walcott  |
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socialnetworking_revvs_small.jpgADOTAS EXCLUSIVE — In today’s economic climate, many marketers are understandably looking for ways to cut their spend. But there’s one area marketers should be increasing their budgets: search engine marketing. The truth is, you can’t afford NOT to increase your search marketing spend – because SEM consistently delivers the highest bang for your buck. In other words, since SEM spending is measurable, marketers can adjust it to the level where it is most effective in terms of ROI. Furthermore, that ROI is often higher than email and banner advertising; some studies show that SEM converts at twice the rate of email and banners.

During tough economic times, marketers need to obtain the highest ROI on each and every campaign, and attempt to maintain their volume goals as well. That’s why right now you need to spend more on the methods that work best to convert browsers, and less on experimental campaigns that don’t necessarily deliver sales results. But blindly throwing more money at search advertising won’t deliver the type of results you need. Instead, smart marketers need to learn to spend more, while maintaining, or even boosting, overall ROI. To “spend more and spend better” on your SEM campaigns, follow these five simple tips:

1. Bid based on results, not on position. Early search engine marketing efforts focused on the position of your ads vs. the position of your competitors’ ads. There are important lessons to be learned from reading your competitors’ ad copy, but if you focus on whose ad is higher on the page, you are focused on the wrong thing. Business metrics like ROI or margin should drive position, not the other way around. For example, look at what a keyword has brought in value over the last week and divide by the number of clicks for that same week. If a keyword is worth $5 per click and you want to run at a 20% margin, you would bid $4.

2. Bid at the keyword level. Different keywords, even with slight variations, perform differently. We saw an example where the plural of a term sold for 50% more than the singular of the same term – and they were in the same ad group! If you have the click volume and the Excel skills to calculate bids for each keyword, bid more for the more effective keywords, gaining volume, and less for the others, saving money.

3. Bid separately for search and content. Did you know that many of the visitors clicking on your ad coming in from Google and Yahoo do not enter a search term at all? They come from the ads that show up alongside blogs, forums, email, or news stories from across thousands of web sites. Ads matched to this channel are known as “content distribution” ads. Different types of traffic have different conversion rates – and should therefore be bid on separately. A shopper who enters a product term in a search engine is looking for information or to buy that product; somebody reading an article is not necessarily as “intentioned,” even if they happened to click on an ad because it caught their eye. All three major engines allow you to enter separate bids for “search distribution” and “content distribution” ads to reflect this difference; content bids should generally be lower.

4. Test and optimize your creatives. Google will “optimize” your ads by showing those with the higher click-through rate more often. This is great for Google, but for the advertiser, you should be optimizing for ROI or revenue/conversion volume. Measure margin/ROI, or revenue/conversions, on an ad-by-ad basis – then pause those ads that are not doing as well.

5. Know your priorities. Are you interested in maximizing revenue? Or profit? Understanding your goals will impact every aspect of your search marketing tactics. For example, tail terms (e.g. “Ford f150 fan belt”) can be more profitable than broader terms (“Ford parts”). A profit-focused marketer will keep the extra money; a revenue-focused marketer will use the extra money to increase their effective budget, plowing it back into more competitive, pricier keywords.

No one said marketing was easy. Sometimes you just have to spend more to get the results you want – and even a budget-conscious CMO will agree to spend more on SEM if ROI remains stable or increases. In today’s heady economic times, every advertiser needs to find a way to spend more and spend better on the marketing methods that deliver the best results.



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