CPA vs ROI Optimization…What’s The Best Practice?

Whenever I’m asked to audit a PPC account, my first question to the client is: how do you measure performance? It’s a simple question and the usual response is CPA (cost per acquisition) or ROI (return on investment). If the answer is CPA, then there are some follow-up questions: how many products or services are offered? And if more than one, then do they cost the same, or are they worth the same to the advertiser? What I’m getting at is that CPA is usually is a limitation of tracking – the advertiser cannot associate true revenue with the conversion. Managing to an ROI, and moreover, managing to maximize profit margin for each keyword will open up new doors for PPC efficiency.
Clients that manage to CPA generally have several products or services. To see the underlying issue with CPA optimization, consider the situation where we have two possible conversions: one worth $20 and one worth $40. If we optimize to an avg CPA of $30, we may be only selling $20 products and losing money. With ROI optimization, this is not a possibility. If CPA optimization is the only possible route, then there are a few best practices to find a good CPA to set as a goal. If the transactions occur online, then calculate the average order value and subtract the avg variable cost to the advertiser – this is the max CPA. If the online conversion is a lead which requires offline sales, then multiply this CPA by the average offline conversion rate to define the eCPA (effective CPA).

The Search for Great Account Managers

In a dynamic industry full of young talent and raw ambition, we’re in constant search for great account managers. So what makes a great account manager and what skills and attributes does such a person possess? As someone who’s hired and trained account managers for a while, I have a few thoughts on this topic.

The responsibilities of an account manager will differ from company to company so I first need to define my expectations of an account manager in the search industry. At its highest level, the role of an account manager is to keep both the client and the agency happy with an account, focusing not only on their client relationships but also maintaining excellent internal relationships with all those who touch their account. For relationships to be successful they need to be built on solid business grounds and that means profit for both sides.

Biases as a Barrier to Good Business Decisions

It has come to my attention that when selecting a PPC provider, a good amount of marketers have what I would refer to as a “blind bias”. The blind bias refers to comments such as “we like Agency X because they seem to be an industry-leader” or “we want to work with Agency Y because we are familiar with them” or “we really like Company Z because they really dominate the PPC space.” I have to wonder, what do these comments even mean? While there might be something to be said for the idea of familiarity as it invokes a certain amount of trust, there isn’t much to be said for allowing basic hearsay to drive crucial SEM decisions. I call this type of bias blind because that’s what it is. There are no numbers or authentic experience attached to these claims, yet they seem to drive the PPC selection process for many advertisers.

PPC vs SEO

Why pay for clicks when you can get them for free?

This question often comes up when facing relatively inexperienced advertisers deciding between PPC and SEO. While I cannot refute any argument based solely on this logic (organic clicks are free and paid clicks are not), I can make a case for PPC even when SEO is at its best – which certainly is not the case for the majority of sites out there.
There are three distinct advantages that paid listings have over organic listings, and as a result these are the three most compelling arguments for integration of SEM into any marketing scheme:

1. If you don’t use SEM, your competition will poach your traffic.

eTail West 2010

Visit us at eTail West 2010! Call 415.814.1001 & mention this post for a conference pass discount when you register as a friend of eSV.

The conference takes place at the JW Marriot Desert Springs, in Palm Desert, CA from February 22nd – 25th. The theme of this year’s show is Take Advantage of the Next Phase in the Retail Cycle and the agenda is packed with sessions and panels to help you plan your retail strategy. On February 22nd, our own Marc Wendling will participate in the Search Summit interactive roundtable discussion covering every aspect of SEM. The day will also include keynote presentations with speakers from multi-channel to pure play and promises to leave you with actionable means to maximize your SEM dollars.

We hope to see you there!

It’s your Algorithm!

Most SEM professionals will agree that a solid SEM program strategy is multi-faceted. The program should focus not just on bidding, but also on Quality Score, data gathering and reporting, and aggressive testing of all aspects of the program. That being said, the great promise of bid automation remains a viable, debatable, and important topic.

There is no doubt that autobid algorithms are important to a well-rounded SEM bidding strategy but they can also be detrimental. Success with autobid depends on a number of factors. Obviously, one crucial factor is how well constructed the algorithm is. Perhaps more important, though, is the level of customizability made available by the algorithm. Does it treat core and long-tail terms similarly, or is it specialized for success with a particular kind of keyword? Is it customizable in terms of defining quantity of data analyzed, statistical relevancy, convergence speed, and data tolerance leading to a bid change? Can you influence bid security, day parting, data aggregation?

Search Engine “Recommendations”

If you’ve had a meeting in the last 3-6 months with a search engine account team, then you probably left the meeting frustrated. It appears that sometime in the last two quarters, the powers that be in the big 3 search engines have recognized advertiser’s dependency on them for strategy…so they’ve taken into their own hands to make the most of it. We’ve heard it all: “Holiday starts in October,” “Get ahead of the competition by ramping up spend,” “You’re missing 50% of available impressions…why not increase bids to get more market share [regardless of performance]?” Here’s my question: When did the search engines make the conscious decision to stop caring about customer satisfaction and begin to make recommendations with their own best interests at the forefront of the discussion? At least they used to pretend that advertiser performance was top of mind.

To be fair, this is not indicative of every team I have worked with. Some teams are more capable than others, and teams that handle more mature programs tend to deliver fewer of these pitches – instead focusing on new products beta tests.

Tug-of-War

by:  Joshua Krafchin

The beauty of paid search marketing is that results are highly trackable. We can trace revenue back not only to the keyword and match type level, but also by the hour or even by the geography of the original search queries typed into any search engine.  This extensive tracking provides us the opportunity to understand not only revenue and cost implications, but a whole host of other criteria from visitor interaction with our website to offline conversions and gross margin. With this surplus of data and choice though, many marketers run into the dilemma of how exactly to define success. Shifting general business priorities outside of search, whether or not they relate to search specifically, can directly impact how we manage a search program.

One of the big tug-of-wars is between ROI and volume. Because search is so measurable and trackable, companies have come to expect hitting and surpassing ROI numbers. In turn, this ability to consistently hit ROI makes paid search revenue highly desirable, and executives will push for more and more revenue volume from paid search. 

Heads vs Tails

Traditionally, search marketers base their search results on a “last click wins” basis. This means that the last click a consumer makes always gets attributed the sales revenue or conversion, regardless of how many other searches were made prior. The result is that brand terms often appear hugely profitable and costly generic terms appear to offer an extremely low ROI, if any at all. This makes it difficult to correctly classify “head” vs “tail” terms.
To combat this discrepancy, whenever we estimate performance for a keyword, we also calculate a confidence interval related to that prediction. When the confidence interval is too large, it means the prediction is useless (typical for keywords with very low traffic). We then need to aggregate in a relevant way (which is usually different from the way keywords are structured in ad groups) to get a critical mass of stats.

For this reason, we offer two different algorithms for automated bid management:

Taking Technology for a Test Drive

Many advertisers and agencies looking for an SEM Campaign Management technology are taking advantage of testing platforms before moving into a long-term contract. This makes a lot of sense.

The question though, is how to know if a test is successful.

Criteria for success fall into two categories: Usability and Performance.

Usability

Pros: You can get a sense very quickly of whether the platform fits your day-to-day management needs. Is the platform fast-loading, intuitive, and flexible? Does it cut down the number of hours typically spent doing routine work? Does it provide easy access to reports and the ability to manipulate large chunks of data with minimal struggle? Within a couple weeks of a test, you will naturally get a good sense of whether the technology is making your life easier or more stressful.