Hitmetrix - User behavior analytics & recording

Column: Search as an Investment

Google CEO Eric Schmidt made an interesting comment the other day when questioned about some of Google’s past missteps: he said that while Google doesn’t always get a given product or service right the first time, it continues to tweak it for a long time after it has been launched. Not all of Google’s products succeed, of course, but those that do are graduates of this process of continual optimization.

Of course, no direct marketers have the resources that Google (or for that matter, Microsoft) has in terms of being able to do the kind of testing required to transform a mediocre or underperforming product into a winner. We’re naturally concerned with short-term gains such as what today’s sales were, what next week’s sales will be, and what the next quarter is going to look like. The problem is that to succeed in Search Marketing, you often have to take the long-term view, which regards paid search as an investment that often needs to be cultivated before it begins to bear fruit.

A few years ago, when commercial competition for space on SERPs was light, it was easy enough to design a simple search campaign with a few hundred keywords, hit the launch button and be in the money. Unfortunately, this simple world has changed radically, and a new study by Jupiter demonstrates how much the landscape has been altered. The study cites the growing competition that we all know is out there (the study reports that 66 percent of marketers plan to increase their Search spending in 2006), and notes the fact that the era of running PPC campaigns using Excel pivot tables is ending (26 percent of marketers are now using automated bid management tools, a 7 percent gain over 2005). It’s quite plain what is happening here: increasing competition is driving up the cost of traffic, which is forcing more marketers to invest in tools, either inhouse or through a SEM agency, providing competitive advantage.

The fact that more marketers are devising more sophisticated means to run their campaigns is good news, because it means that there is less obvious waste in the marketplace. But while such investment is necessary, it is by no means sufficient to ensure that a marketer’s search campaigns will be successful. For this to happen, a second level of investment must be made: an investment in data. It takes time, lots of clicks, and yes, a fair number of dollars to establish a statistically valid model against which you can begin to test your campaign variables. Which keywords perform best? At which time? For users coming from where? Which combination of ad copy, landing page offer, and SERP position yields the best results? You might think you’ve got the answer after a few dozen clicks, but unless and until you’ve accumulated enough of these results to comprise a statistically valid sample, you can’t possibly be in a position to make judgments about which variables to think about changing.

It would be wonderful if there were some other way to get this data other than to buy clicks from Google, Yahoo, or MSN, but there isn’t. Every business is different, every customer is different, and so is every search campaign. This is why the crusty old adage “you have to spend money to make money” is just as true in search as it is in the business world.

The good news is that smart marketers are using the data that they have acquired through the process of running search campaigns to vastly expand their ability to deliver targeted, successful search campaigns. And as the search engines continue to roll out more advanced segmentation technologies, including dayparting, geotargeting, and other overlays, the value of this historical data will rise, and their investment will begin to pay increased dividends.

Of course, just having the data you’ve paid for on hand is useless unless you can begin to see meaningful patterns in it that can be acted upon. Automation can help you crunch the numbers, but no tool can do the strategic thinking for you. This is why you need to think hard about whether you have access to the resources – either inhouse or at your SEM agency – which can give this data strategic direction and tactical value. Unless you have all of these crucial pieces in place, it will be very hard for you to make your investment pay off.

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