Paid Search Testing: A New Study From Jim Novo

Page views, Conversions & ROI from the perspective of THE MARKETER!?

If you've ever wondered what types of paid search tests you could be running with clients offering a bountiful budget, check out this study by Jim Novo from the Yahoo Analytics Group Discussion. I've postd the entire thread for you to follow. It's a great sutyd and it addresses a lot of concerns we have as search marketers highlighting the suspicions we all have when trying to associate the measurement of our paid campaigns to the overall successes of the the campaign as a whole. thanks Jim!



> I guess what I'm saying is that the only results from a PPC campaign

> that matter are the *incremental* clicks that paid search provides

> above and beyond organic search. And if those incremental results

> aren't significantly higher, it's a lot harder for me to justify the

> spend... 'ego spending' of course aside.



Exactly, and the question if you are optimizing *profits* as opposed to

sales or "exposure" is where is breakeven on the PPC? This of course

depends on the margin of the business and the cost of the click, but there

are several other dynamics in play, including the following:



1. The tendency of a 1st ranking PPC to deliver sub-optimal ROI due to

"sport-clicking" by causal / newbie "surfers"



2. The tendency of lower-ranking PPC to deliver higher ROI due to bid gaps

and (often) dramatically lower costs



3. The tendency of "deep searchers" - people who click on lower ranking

organic and PPC links - to be further into the research cycle / more likely

to convert to final objective



So, for example, in one 2003 test, a page ranked organically as #2 for a

certain high-volume phrase. This same page content was used to create a

landing page for a PPC campaign using the same search phrase. The test was

conducted in March, neutral seasonality for this business.



With a #1 PPC ranking, the PPC campaign generated 11% in *incremental*

sales with a 60-day latency tail but had a negative 12% ROI on margin minus

overhead (note specific use of the word incremental, which I will explain

further below). When this same listing was dropped down to "deep shoppers"

at PPC rank #4 (in this case, 1st ad at bottom of Yahoo page), it generated

4% incremental sales with a 1786% ROI on margin minus overhead for the same

60-day latency tail. That's almost 18 : 1 payout. Without the tail

(first conversion only), it was 623% (almost 7 :1).



In addition, the "deep shopper" segment on average had a 70% repeat

purchase rate as opposed to 58% for the #1 PPC position. So even the "tail

of the tail" was better at position 4. This was on the higest volume

search phrase for the site, so it made a huge impact on overall

profitability.



Remember, the landing pages for both the high ranking Organic link and the

#1 ranking PPC link were exactly the same - layout, copy, all of it.



Now, the reason I specifically used the word incremental is we had control,

which demonstrates a real dark side of PPC with Top 3 ranking Organic.



When the #1 ranking PPC ran with the #2 Organic link, the sales *volume*

coming from the PPC link ran about 43% versus 57% for the organic link.

This ties pretty closely with some recent studies on click behavior (on

average, 60% click organic, 40% click paid).



But dig what this really means: if incremental sales are 11% versus control

(no PPC) and sales volume with PPC is 43% PPC, that means nearly 77% of PPC

sales were **stolen from the organic side** - they would have happened

anyway without the PPC link.



Factor this "media cannibalization" into ROI, and now we're down around

negative 48% ROI for the test #1 ranking PPC with organic at #2. For every

$1 we spend we lose 48 cents - 12 cents in tangible ROI, and 36 cents in

"Opportunity ROI" - ROI we won't get because we wasted the click budget by

not using it to buy "real" incremental clicks.



Hey, just increase the budget, we'll make it up on volume!



This is precisely the situation I was alluding to in the first post on this

thread.



The visitor clicked PPC, landed, went Back, found Organic, converted. With

all this occuring in the same session, it's highly likely that paid click

is a pure subsidy cost - conversion would have happened anyway. To peg

this click as "source" gives credit where credit is (probably) not due, and

leads to eroding margins through increased PPC subsidy costs.



> So back to the original question, can you think of a solid way this

> incrementality could be tested?



"Solid" way? Well, I guess that would depend on the technology that was

available and the sales volume you are talking about. Not sure you can

truly "A / B / C" it without some significant bid management / search

engine API technology. I'm not sure the engines would give up that kind of

control - though I bet THEY have tested it at some level.



The above test was a 3 week manual "alternating days" test on Overture for

a store with 500K - $1 million annual sales and average order size about

$72, so there wasn't a lot of room for high tech tools.



If you run A on Monday, B on Tuesday, control / C on Wednesday, then start

over with A on Thursday and continue this rotation, the following Monday B

will run and on Tuesday C will run etc., so by the end of 3 weeks you will

have A, B, and Control data normalized by day - both campaigns and control

ran on every day of the week. Not a statistically pure methodology, but

not horrible, for sure - and cheap! As Robin said, "I'd rather do it

unscientifically (e.g. pull the ads for a time period that is longer than

the average latency and measure) and swallow the error rather than just

"attribute" the conversion."



If the result spread is significant enough, as it was on this test, I'll

give up points in accuracy to get closer to the "directional truth". Each

of the top 30 search phrases *where there was a top 3 organic ranking for

the phrase* was optimized in this way with the results very directionally

consistent across all phrases. It was almost always more profitable to

have a lower than #1 paid ranking when a top 3 organic ranking was present.

Below the Top 30 phrases, some of the lower volume phrases produced

inconsistent results which was probably a result of test methodology error

/ lack of frequency.



While it may not be "practical" for large scale retailers to test like

this, you would think for certain high volume phrases it would be worth

poking around it a bit given the potential for cost savings. Definitely

not worth thinking about if sales is the focus, because (probably

unprofitable) sales will be lost without the #1 PPC listing.



Are there any analytics providers with a direct interface to the search

engines capable of generating / controlling / measuring this kind of

testing on a large scale? Any analytics providers that interface with

complex bid management systems like Kevin Lee's didit.com ? I don't know

the answer.



Of course, changes in the way paid listings are displayed (often related to

how many bidders there are) can change the outcome of this test. The

results on Google were also directionally consistent though less dramatic.

I assume this is because of the different PPC display approach versus

Yahoo, but perhaps also due to some of the "alchemy" surrounding Google PPC

rankings, which are more difficult to control on Google.


And for sure, there are reasons people buy PPC other than to drive profits,

so being #1 may be worth it, but the true costs should be quantified.

Jim
jim@jimnovo.com
http://www.jimnovo.com

Do-It-Yourself SEO: Now Uncle Joe Can Optimize Too

Seriously now. If you are going to advertise the ultimate SEO software solution, you should really be ranking pretty high for terms like "seo software." Sites like seoyourself.com just give a bad name for those of us who work in this industry and have busted our butts to get where we are today. It's not just about TITLE and META tags, writing a ton of content and trading links. Many of us come from traditional backgrounds spawning from the web like designers, developers, producers, copywriters, etc. I can speak for myself that we not only have an understanding of how to grow a site from an idea to a sketch to a mockup to slicing it up to programming it to...the list goes on, we are experts in this field of search now. Most local business owners think "algorithms" is greek. Hiring a firm, agency or even freelancer to manage your search marketing efforts is a cost-effective way to make sure the rest of the things in your business are running smoothly and being tended too like accounting, finances, affiliate programs, offline marketing, media buying/planning and making sure the carpet isn't coming up. A do-it-yourself solution isn't wise money spent unless you are VERY familair with this field, attended some webinars or trade shows or took a course at searchenginecollege.com. At some point you truly need an expert to evaluate what you are doing. It makes sense and unless you have a money in the back of your business; be sensible and make sure your dollars are earning you something valuable in return.

Is the Holiday Season Truly Over?

Depending on your religion your holiday may not be over yet. Hanukkah, known as the Festival of Lights or Festival of Dedication, is an eight day Jewish holiday that starts in December or, sometimes, late November. As some of you may know Hanukkah is currently on Day 3 where they will be lighting the 4th candle (thanks to Jason Bass for the clarification). So why is this important to note for Search Marketing? Well because people are still shopping online. Christmas may be over, but the percentage of the people on earth who are observing Hanukkah may still be shopping online, trying to scramble some last minute or belated gifts together for their loved ones. I've noticed some purchases of holiday items recently for ornaments and gift related items. So someone is trying to get their gifts together still or they've already started shopping for 2006. Whoeve they may be, review your current keyword strategies for paid campaigns and refine them to align for the continued influx of holiday shoppers. Happy Hanukkah!

Blingo.com - Win Prizes With Search

Come on it doesn't get any better than this, winning prizes just for using their search technology? Seems too easy huh? Well being that I'm in lovely San Diego and these guys are based out of Cali, I've got to support them out of geographic loyalty.
Here are some details from their site:
How does it work?

It's simple:

1. We pick a bunch of random winning times.

2. Search at the right time and you win, instantly. No registration required.

3. Then tell us where to send the prize.

Clicking search results or sponsored links does not increase your chances of winning, and you're limited to 10 qualifying searches per day. The best way to win on Blingo is just to use it whenever you want to search the web.

Check out Blingo here

Targeting Soccer Moms and Their Kids - Coupons

Soccer moms are about to have their world turned upside down and I'm not talking about their pineapple cake, we're talking mobile marketing! Not only will they continue to monitor their kid's cellphone usage, minutes, etc; now they have to deal with an onslaught of paperless coupons. Read about this below.

Bringing the cell phone into a multi-channel marketing strategy, communications technology company Twelve Horses and Mobile Technology Group have launched a service that lets retailers deliver mobile text coupons that can be redeemed in stores or online.

David LaPlante, CEO of Twelve Horses, said the coupon service is starting to be deployed in Europe and is under consideration in the U.S. by two apparel retailers and one music merchant. “The technology has definitely hit a nerve,” he tells InternetRetailer.com.

LaPlante adds that the cell phone-delivered coupons – which appear as alpha-numeric text messages that can be entered onto a retail web site, spoken into a voice-recognition system, or simply shown to a store retailer – are expected to be particularly popular with young people accustomed to text-messaging. “These teens and tweens don’t necessarily have a desktop computer to receive e-mailed coupons, but they use cell phones and they can show mom and dad how to use text message coupons,” he says.

Retailers as well as other marketers are expected to deploy the cell phone coupon service as part of broader marketing strategies that include e-mail marketing and other forms of advertising, LaPlante says.

He adds that the cell phone coupons are intended for consumers who opt-in to receiving them after shopping at merchant. “The mobile communications market won’t make the mistake of e-mail and telemarketing with non-permission marketing tactics,” he says.

Going Postal At DMOZ

Okay so I've come across this thread at HighRankings.com and a business owner was wondering why his site's TITLE tag was reading incorrectly in the Google SERPs'. Quickly it was noted that his TITLE was being generated via DMOZ, where he proceeded to head to contact them about revising his outdated description and TITLE. He then stated "I have had trouble with them before; their answers are not always polite."

Why is that? We all deal with DMOZ editors on a weekly basis trying to update old listings and add new ones. Maybe it's time that DMOZ gave its volunteers a day at the spa to relieve some of their cranky moods. Another thing, you're a volunteer, if you don't like dealing with annoying people wondering when their site listing is going to appear, don't volunteer. It's as simple as that. DMOZ is a service industry essentially, you'd like to be received with a smile when taking the time to add your site to their directory, not reminded how in RULE#401 it states the proper way to format a question to them. I think some of the people over at DMOZ are on the verge of going postal at times ...

Podcasting with Yahoo

I was doing a search for "podcasting" in Google and found this:
http://podcasts.yahoo.com/

Are You Scary Smart? Happy Halloween!

Top of your class? An innovator in your field? Wicked good at what you do?

If so, maybe we should talk. Right now Google is looking for the brightest minds in sales management. One of our corporate goals is to create an almost spookily entrepreneurial environment, and if you'd like to be a part of that, we'd love to hear from you...Read more here

Free Basing With Google?

Google Base To Rival Craigslist and Ebay? It may seem like that looking at these images pulled from base.google.com before they were taken down. Could Google be allowing free web hosting for consumers looking to upload content via their site? What sort of implications will this have on search?


Well, Google gains more of the search market share...yet again! I"m seeing sites already with 60-65% of their traffic referred from Google. The industry data is reporting 45%. Just when you thought the only new update would be MSN's ad center launch, Google surprises us yet again. Maybe not though, maybe it was inevitable.

Keyword Pricing Increases in 2005

Keyword prices have escalated on the past years as reported by Fathom Online's Gregg Stewart, senior VP-channel management and marketing. The most inherent increases came in the hospitality, retail and travel verticals.
So this may seem very obvious to you of course, yes more marketerd are using search as branding tactic so the demand is going to increase, hence so is the cost. They mention "conversion optimization" though in the article in regards to creating specific landing pages where someone clicks through and finds exactly what they are looking for...make sense? Of course it does, you don't want to search for tours to Italy and end up in Budapest do you? You definitely do not want to be searching for good restaurants to eat at in downtown San Diego and then end up at some hole in the wall, health hazard.
If you are going to dabble in the world of keyword purchasing make sure you are showing your potential customers what they want to see. Make sure you are measuring everything as well. If the demand keeps going up so will the cost and you need your budget to be flexible.