Pay for Performance Might Not Work, Part 2

In a pay-for-performance relationship, you and your SEM management set up specific goals. When your SEM management reaches those goals, they get paid. If they don't reach those goals, they don't get paid. And while that sounds reasonable enough, it's actually a relationship that stands to hurt you.

Last week, we talked about why pay for performance means preventing your SEM firm from offering you its most creative, powerful solutions. This week, we'd like to add a second problem to the pay-for-performance conversation: since pay for performance means building a campaign around specific goals, the campaign becomes out of date if the landscape changes. And since goals define your whole campaign, outdated goals leave you fighting yesterday's search battle in tomorrow's search world.

That's one of the last situations you want to end up in. Here are a few examples of how it could happen.

Market change. As late as a year ago, environmentalists were probably more excited than anyone else about the (then-futuristic) hybrid car. But now, high gas prices have made hybrids a lot more popular with everyone, environmentalists or not.

And if you were using SEM to sell hybrids, that attitudinal shift would make a world of difference in your SEM approach. You would need to develop a new set of ad messaging and landing pages, presenting yourself one way to the environmentally conscious and a different way to the pump-price conscious. And figuring out which searchers fall into what camp requires a very deep understanding of keyword data, conversion metrics and other search analytics.

Meanwhile, different market interests mean your target searcher has changed: Last year's largest searcher might have been the environmentalist; this year's might be the gas-cost conscious. And the searcher you most want to capture — the searcher you're pursuing most aggressively — translates into the keywords you bid on the highest.

Now what if, when you started your SEM campaign in 2004, you created a pay structure that gives most value to capturing the environmentalist? That pay structure made perfect sense in 2004. But if it's out of date now, it could mean falling short in capturing your most qualified leads and not making the changes you need to make to reach out to your most valuable searchers.

Internal change. While we haven't been watching the site closely, is probably moving, as we speak, from an e-tail model to a lead-generation one. That's because IBM itself is transitioning from computer retail to management consulting. And so needs to shift from working to sell computers, to working to gain IBM Business Consulting Services a wider client base. And the change in corporate and Web site architecture also necessitates a change in SEM: For starters, it requires an entirely new set of keywords, ad messaging and landing pages.

While the IBM transition might be extreme, transformation of one kind or another is commonplace. once positioned itself as a bookstore. Apple, which you probably associate with iPods, used to be the major hardware competition for IBM (think Apple IIe). Hush Puppies went, practically overnight, from waning American traditionalist to hipster chic. Sooner or later, every business takes a turn for the surprising.

And when you're undergoing change, you need to ensure your SEM campaign changes, too. If you've locked your SEM management into selling the business you were last year, but aren't this year, that will be disastrous when you evolve further still in 2006.

Search change. In the Google/Geico case, a U.S. District Court ruled that your competitors can bid on your branded terms. That makes defending market share more important in search than ever before. Meanwhile, the newly developed MSN AdCenter, set for complete release in 2006, lets you reach out to consumers on a powerful new level of granularity. And on yet a third front, as a result of its new deal with AOL, Google is set to feature rich media ads in the somewhat near future. That will open entirely new vistas of search-based branding.

These were all major search news items of 2005. Each item adds new opportunity, and new risks, to every search campaign. And many advertisers probably didn't see one — or any — of these massive changes coming back in December 2004.

And if they set up new SEM contracts a year ago? If the contracts were for generalized fees, it's no big deal: Whenever the landscape changes, their SEM firm is free to change with the times. But if they set up a pay-for-performance relationship, the goals they've set up might not have taken the new 2005 search world — and certainly not the new 2006 search world — into account.

Both your business and the world your business exists and advertises in are changing all the time, and so your relationship with your SEM firm needs to help you respond to that change. If it doesn't, you could be looking at lost opportunity cost, serious exposure to risk and a position on the sidelines as the competition meets the new landscape head-on.

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