Safe Bets Are Risky

OK, a bit of unconventional search engine marketing wisdom: Return on investment won't always tell you how well your campaign is handling. In the short run, sure, it's a wonderful thing. Long-term, though, looking at ROI alone could create serious headaches — and we mean the kind of headaches that can cost a marketing manager his or her job.

That's because ROI is a measure of only one kind of success: how well, directly or indirectly, your SEM drives overall sales. Strong ROI means that your SEM did a good job of driving sales; poor ROI means that it didn't drive sales well enough. But ROI isn't the whole story.

Though poor ROI clearly means that your campaign isn't operating well, strong ROI doesn't mean, necessarily, that your entire campaign is healthy. Sometimes, strong ROI happens despite an inefficient campaign.

It's all a matter of what SEM campaigns actually need to do. SEM campaigns need to do not one, but at least two separate things:

1. Drive sales, directly or indirectly (i.e., create strong ROI).

2. Capture market share, and keep your competition away from your customers.

It isn't hard to accomplish the first task expertly, while completely ignoring the second. One scenario? The SEM marketer who throws close to your entire ad spend on one remarkably powerful keyword, and tosses the remaining money at a few random terms.

· That one successful keyword can create enough good traffic to achieve ROI.

· In some industries, even if the keyword only generates one sale, the marketer might achieve ROI.

The one-term ROI scenario might sound far-fetched, but it's entirely conceivable: because, in general, you don't need a whole lot of keywords in your campaign, or a whole lot of SEM savvy, to get ROI. You just need to find a few high-conversion keywords, and the cash to burn to be able to pay for top ad positions on those terms.

The ease of getting ROI ought to be great news. But there's a catch. And that catch is points two on our list above. Because getting ROI from a few power keywords, and focusing on those terms exclusively, ignores the market share problem entirely: it leaves a whole range of valuable keywords open for the taking. While you or your SEM manager is busy capturing ROI on a few power keywords, your competition is busy scooping up your customers on all the other terms that your campaign has missed. It's good ROI; it's bad for business.

We're not just talking about losing the war on some out-there terms that only the savviest marketers would think of. We're talking about losing the war on some very basic branded terms. That's because ROI-based SEM is likely to choose the power keyword — which gets nearly guaranteed conversions — over the branded keyword, which isn't a grantee. But not bidding on the branded term means that searchers looking for your brands might see your competitors' ads, and not yours.

Let's say, for example, that you're Nike. Instead of bidding on the more expensive “nike running shoes,” you stick to the low-cost, high-power “nike air pegasus 10 mens” — which almost definitely represents a searcher about to buy (you know that because the term is so specific).

Meanwhile, though, Reebok went and ran ads on “Nike Running Shoes.” All the searchers who came to search engines looking for Nike running shoes got driven, through Reebok ads, to buy Reebok sneakers. In other words, you did get your ROI on your SEM, but Reebok took the customers who came to search engines to find your products.

So ROI alone won't necessarily help you, in the long run. It might not even help you in the not-so-long long run. Because focusing only on ROI might not mean focusing intelligently.

That being the case, why would a marketer choose an SEM approach that does only focus on ROI? We don't mean to ask why the SEM manager (be it a firm or an in-house team) would focus on ROI exclusively. That's not a difficult thing to understand: just focusing on ROI is far easier to do, and far easier to measure, than the far more complicated task of dealing with competition and market share. ROI, after all, is simply a matter of looking at balance sheets; but following market share means understanding what's going on in the entire search space in your sphere — without strong analytics, that can be an awfully hard task indeed.

Our question is why a marketer would choose to go with SEM management that only focuses on ROI. And the answer is twofold. First, many marketers simply don't realize that's there's more to SEM than ROI. So they won't look beyond ROI when they're looking for SEM management.

But there are other marketers out there who, despite understanding the benefits of looking past ROI, still stick with SEM services that act as if ROI were the be-all-and-end-all of the search marketing world.

The logic, for that second group of marketers, goes something like this. Breaking ahead of the pack might really be wonderful. It might even get you that great promotion you've always dreamt of. But, on the flip side, you're not likely to get fired for not breaking ahead of the pack, and you are likely to get fired for dropping an ROI-producing SEM management firm, in exchange for one that couldn't get good returns. Which is a perfectly legitimate fear.

But here's a less-than-pleasant scenario. Two years go by. Your competitors have stolen enough of your traffic, and have otherwise moved ahead quickly enough, that it doesn't take serious metrics of any kind to see that you're losing, and they're winning. Your CEO, your COO and your board want to know why they're winning – and, from the looks of it, have been winning for a while now. Somebody's head will roll.

What do you say? That you've spent the last two years bending over backward to minimize SEM risk? That you were keeping your eye on getting strong returns, and getting them to please just ignore the huge market share that the competition took? That's a hard argument for angry board members to swallow.

Making it a hard charge for marketing managers to rebut. But it's a charge that everyone who ends up creating long-term risk, in the name of short-term safety, will have to think about seriously — sooner or later.

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