ADOTAS — I’m going to hit you with a hard truth. If you are a search marketer with strong brand equity, and rely on Google for performance metrics, you are allocating your digital marketing budget inefficiently. If you’re not analyzing brand ROI and non-brand ROI separately, you don’t know the true performance of your search advertising spend. You are not alone and it’s not your fault. Google is confusing you intentionally.
The Brand Scam Explained
Combining brand ROI and non-brand ROI is like sticking you and me in a room with Warren Buffett and declaring that the average net-worth of each person in the room is $20 Billion. This says a lot about Mr. Buffett’s wealth, but not much about you or me. Likewise, averaging your artificially inflated brand ROI with non-brand ROI significantly distorts any analysis of your search advertising performance.
Averaging brand and non-brand ROI is misleading because traffic from brand and non-brand searches performs differently and is priced differently. Clicks from your brand terms convert at a very high rate, but they drive few incremental sales, and therefore they are priced inexpensively (this is what “quality score” really means). The combination of low prices and high conversion rates creates inflated ROI metrics.
On the other hand, clicks on non-brand (generic terms) convert at a much lower rate – but since these clicks often represent new customers who were not already searching for you specifically – they are much more expensive.
Buying your brand term is like hiring a doorman for your brick-and-mortar store. Sure, the doorman technically brings in buyers, but you wouldn’t credit him with many incremental sales. Search ads targeted to brand terms are the doormen of the search advertising world. As Steve Gibson, Client Director of Search at Initiative, says, “a brand search account is most representative of all other non-search marketing efforts” Brand searches are the result of other marketing spend. They don’t drive new sales.
“Want to know how well your non-search marketing efforts are doing?” Gibson added. “Check your brand-only search campaign.”
When viewed this way, brand term returns look less like those of Warren Buffet and more like Bernie Madoff’s returns: great on paper, but when you dig a little deeper there is no real value. This is the heart of the Google brand scam. Google inflates its overall search advertising ROI by averaging disproportionately high — and fundamentally different — ROI from brand terms.
When you compare search to all other channels of customer acquisition, AdWords stands apart because they have focused marketers on inflated metrics and other media channels — display, social, other search networks, etc. — don’t stand a chance in comparison.
This is by no means a new phenomenon. In fact, George Michie — Chief Marketing Scientist, RKG — undertook a similar analysis over two years ago. Savvy marketers are separating branded search ROI from non-branded search ROI because it gives them a much clearer view into the reality of their paid search campaigns, and allows them to make more informed decisions about their overall performance marketing portfolio.
Brand Scam In Action
I recently reviewed a client’s AdWords campaign where the “dashboard metrics” showed that the advertiser spent $820,000 per month for 158,000 conversions at an average CPA of $5.19. That’s a 12:1 ROI.
This seems fantastic, but separating brand and non-brand makes this Buffet-type performance look more like Madoff.
Spend on brand search was $96,000, and it “drove” 148,000 conversions at an average CPA of $0.65. That’s more than 8x the performance over the account average.
On the flip side, the “hidden” non-brand spend of $723,000 only led to 10,800 conversions at an average CPA of $67. That is 13x more expensive than the “average,” and over 100x worse than brand CPA.
When you compare the brand term ROI of 91:1 to the non-brand ROI of 0.89:1, the misleading nature of the dashboard metrics average is finally revealed.
This example is not an anomaly. We almost always see these types of results when analyzing search advertising spend from household brands. When advertisers let Google lump their brand term performance together with their non-brand performance, massive inefficiencies go undetected. Here, the blended $5.19 CPA is really misleading because the advertiser spent 88% of their budget on 7% of their total conversions at a CPA of $67.
In this case, the answer is not for the advertiser to cut off non-brand search budget entirely. Remember, non-brand traffic is essential to every search advertising portfolio because it drives incremental revenue from new customers. Rather, the advertiser should measure non-brand ROI independent of brand ROI so they can make an apples-to-apples comparison to other performance advertising channels. Then, the advertiser should reallocate inefficient non-brand spend to other search providers or digital channels that can beat the $67 CPA.
Why This Matters: Poor Budget Allocation Decisions
The numbers don’t lie. Reallocating inefficient non-brand spend (the inefficient spend often masked by “hyper-efficient” brand spend) to external advertising sources will yield a substantial gain for advertisers. The ramifications of misleading search ROIs extend far beyond the PPC world. Advertisers are losing money while other forms of digital marketing are suffering because they are compared to Google’s “average” ROI. Separating brand and non-brand ROI is beneficial to everyone in the digital advertising game, because when advertisers see the true value of their AdWords campaigns they can make informed decisions about their marketing budgets.