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Should Dayparting Make You Nervous? June 26, 2006

Posted by Bill in Online Auction Tips, Search Marketing.
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Last week, Google rolled out automated dayparting–the ability to automatically serve ads toward optimal times of the day. This is good news for search: it is bound to greatly heighten advertisers’ precision, and eliminate campaign waste. What’s more, Google dayparting will be free. (Until now, automated dayparting was available only through third-party search firms.)

But despite my overall excitement about the product, I’d still like to add two words of caution. First, it’s bound to make search still more competitive. And second, if your searchers change schedules faster than you can follow them, it could leave you targeting toward the wrong times.

Smaller Windows, Bigger Competition

Dayparting relies on the idea that for many kinds of businesses, certain times of day are highly valuable; other times of day are less relevant. Businesses want to place as much spend as they can on those most-valuable times, and to shift spend away from the less valuable time slots.

While that goal makes excellent business sense, it’s also important to realize that no advertiser works in a vacuum. It isn’t just one advertiser that wants to move to the best time slot–it’s all of them, all at once. Which is a setup for shifting the nature of search competition entirely, from small skirmishes throughout the day to an all-out war during Prime Time. And because it’s a fight over your best search traffic, it’s a war you won’t be able to avoid.

When that level of competition hits (and it will take time–because not everyone will figure out when the optimal times are, right away), you’ll need to rely more than ever on strong ad copy–to pull searchers away from your many competitors, and toward you; you’ll also need to be able to develop stellar conversion architecture, to make sure that the traffic you pull in–which, in that highly competitive landscape, you’ll need to pay more to get–definitely converts for you.

In other words, if you’re in a daypart-oriented business, Google dayparting will make all the other aspects of your search more vital than ever before.

Search Times Are Changing

To understand how search markets can migrate from one time of day to a different one, consider online personal shopping.

Lots of people make personal purchases and purchasing decisions at the office. There could be many reasons why that’s so: people need a break during the day; people would rather cut in on their work hours than on their personal lives; people reflexively think of brick-and-mortar “regular store hours,” even when they’re shopping online.

But an alternative reason for workday shopping might be technological. Until relatively recently, most people got their broadband connections at work, and had dial-up at home. And it’s a lot easier to shop through broadband than it is to shop through slow dial-up.

If broadband is the primary reason your market is doing product searches from 9-5, then widespread adoption of home broadband is likely to affect the pattern. Now that they’ve got home broadband, your market might do online shopping and searching at nights, on the weekends, or in the early morning. And if you aren’t on top of your market’s changing online habits, you might end up focusing your dayparts toward 9-5–which is when your market used to shop, but isn’t shopping any more.

Learning who your searchers are, and when they search, is entirely an issue of having the best analytics. The better you are able to gather in-depth metrics and understand them, to test out new initiatives before rolling them out fully, and to know how to ask the right questions about your campaign, the better position you will be in to find the right times of day for advertising to your market–wherever it migrates.

Which is to say that the vast benefits of dayparting need to go hand-in-hand with great analytics. If they don’t, things could get risky.

Using the Tools

The point I’m making here isn’t that we shouldn’t be exhilarated about Google’s dayparting–or Google’s geotargeting, or MSN’s targeting suite. What I’m arguing, instead, is simply that targeting capabilities are tools. And rather than being inherently good or bad, tools are best at intensifying the way things already are: they build on strengths and magnify weaknesses. That includes your skills at fighting the competition when things get rough, and your ability to know what your market is doing and when.

Like it or not, targeting tools are the new search reality. And for those of us who can work well without the tools, they are undoubtedly a real cause to get excited. For everyone else, maybe it’s best to see them as a wake-up call.

Bigger Metrics Are Best June 12, 2006

Posted by Bill in Search Marketing.
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In the marketing world, there’s a tendency to assess campaign success in ways that look at individual conversions, rather than considering the big picture. I’m talking about assessing campaign success according to metrics like cost per acquisition (CPA), cost per order (CPO), or through an ROI figure defined as the cost of an individual conversion, compared with the returns that the conversion brings.

Now, scrutinizing every relevant metric–as carefully as possible–is absolutely crucial for developing campaigns. But it’s equally important to realize that there is also a big picture to consider. That means realizing that, sometimes, you can get more on volume than you do on margin; and that pumping a little more money into a campaign can sometimes yield incredible results. And analyzing your campaign at the micro-level won’t let you evaluate those big-picture opportunities. For understanding the big picture, you need to look at overall net profit.

Here’s one example. Let’s say you’re selling apples, at $10 an apple (a little pricey–but let’s say they’re really good). If you have a $2 CPO, you’ve made $8 on every apple; from the vantage point of the individual conversion, that’s a 5:1 ROI on revenue; 4:1 on net revenue. Which certainly isn’t bad. But maybe doubling your investment can increase your orders fivefold–so you’re spending $4 to sell every apple, and your ROI on each transaction is materially reduced; but you’re selling 50,000 apples, say, instead of 10,000. That means you’re bringing in a net profit of $300K instead of $80K. Your CPO went up; your ROI on each conversion went down; but your net profit grew by $220K.

Of course, managing your campaign to the big picture takes a certain amount of risk. That’s because, if you’re investing more on each transaction, you’re bound to hit a point of diminishing returns. And in something as big as an ad campaign, it can be hard to step back in advance and point to where, exactly, that point will be. To avoid that risk, you need to conduct elasticity testing before you push up those CPOs (or CPAs); and you need to be able to pull back your investment, quickly, if it turns out that you’ve miscalculated.

That need for testing and quick flexibility explains why the marketing world hasn’t caught on to the big picture just yet–at least, not as much as it could. The traditional ad world, after all, is almost entirely devoid of reliable metrics; and its ad cycles take place over weeks, months, or even quarters. So it’s very hard to conduct tests in advance–and, if you’ve made a mistake, it can be close to impossible to correct it once you’ve put things in motion.

But online marketing–which is accountable, testable, flexible, and fast–is an entirely different story. That’s especially so in the highly sophisticated arena of cutting-edge search, which offers extraordinarily granular metrics and rapid solutions (including real-time bidding at search’s most advanced levels). Testing capabilities means you can roll out new initiatives with a strong understanding of the landscape; and the ability to shift gears rapidly means you can backpedal on initiatives that turn out to have been miscalculated. And the more complex your solution is, the stronger testing capabilities you’ll have, and the more maneuverable your campaign will be.

Which means that traditional marketing and search are entirely different. In the traditional world, you can be tied down to evaluating your campaign at the micro-level, because seeing the big picture is just too risky. But in SEM, gearing your campaign exclusively around the micro-level means locking yourself into old modes of thinking that can mean a huge opportunity cost.

To Recoup Click-through Losses, Redirect June 5, 2006

Posted by Bill in Behaviorial Marketing, Search Marketing.
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While the problem of non-converting visitors exists in all of online marketing, it’s particularly troubling in search. That’s because search is pay-per-click; and so every searcher who comes in carries a cost–and every non-converting searcher wastes your spend. While the loss is certainly reducible (you can sharpen your keyword list; improve your ad copy; and improve your demographic segmenting, to name a few solutions), loss is never completely avoidable. And when it happens, you have to recoup that loss somehow.
Typically, recouping losses means bringing in new searchers: once enough new searchers convert, they compensate for the non-converting ones. But even when coupled with overall improvements in your conversion path (like getting better ad copy, landing pages, and customer segmenting), the strategy is still inefficient. First, click-throughs are expensive; and so paying for more of them isn’t the cheapest way to make up for poor performance the first time. Second, your new wave of searchers will also include non-converting visitors–which means that, by trying to solve this problem, you’re creating the same issue all over again.
A much better bet stems from the basic efficiency principle that, often, it’s easier to improve what you have than it is to start from scratch. Which is why, rather than starting over, it’s cheaper to get those “lost” searchers to finally convert.
That’s the theory behind behavioral search retargeting, a new search method. (disclosure: my company is among those offering this service.) The premise goes like this: once a searcher has left your site without converting, you use display ads (banners, skyscrapers and the like) to follow her around the Internet, until she clicks on your ad and comes back to you. Since she’s entered your site before, she’s probably interested in the kinds of things that you sell; she’s also likely to recognize your brand. So even if she didn’t convert the first time around, she’s likely to click on your display ad at some point–and studies show that lost visitors who revisit within 72 hours are very likely to convert the second time.
(The name “behavioral search retargeting,” by the way, means that you’re retargeting your advertising to lost viewers in a new form, based on past search behaviors–like their clicking on your ad in the search results page.)
Not only is behavioral search retargeting strategically efficient, it’s also cheap. That’s because display ads, on the whole, cost a lot less than search ads do. To give one example: if a keyword costs $1 a click (which is on the lower end of prices for best positions), and you’ve got a 2.8 percent click-through rate (which is average), you’ll pay $28 for 1,000 impressions. Compare that with the very upper end of the display ad scale, in which you might pay $15 per 1,000 impressions. And since you’re advertising to people who are already likely to recognize your brand and your product type, you can get your ads to pop at much less coveted–and much cheaper–areas of a given site page.
In other words, you get to recoup a lot of your losses, at a much lower price; meanwhile, you’re assured that, sooner or later, a much higher percentage of the clicks that come in will ultimately convert.
A final, somewhat philosophical word. While all of this might sound like a bold new move for search, retargeting is really the logical next step in a broader evolution. Search began as a field about engines alone, but it’s becoming a field that’s as much about conversion architecture as it is about keywords. That’s only natural: search is the bridge that ties initial interest with final conversion, on nearly every conversion path. It includes the tasks of picking up traffic driven by TV spots, word of mouth, and generic needs; and driving that traffic to convert through Web sites, call centers, and bricks-and-mortar stores. And so search success is determined by how well you’re able to coordinate your traffic, at every step of the way.
Which is why getting the most out of search is as much a matter of overall conversion paths as it is a matter of bid changes; and why addressing the ways search impacts post-site behavior is a logical next step in where search takes advertising next.