With the prominence of paid search advertising, it is essential that senior marketing managers understand the channel from search engines’ perspective.
It is also important to understand that SEM is in fact a glorified negotiation between you the enterprise buying inventory and the search engine selling inventory.
Quite often general marketing managers can lose sight of this. Always remember, that your objective is to pay less and get more while a search engine’s objective is to increase ad sales.
Inventory Quality – The Magic Bullet for Paid Search
The number one reason why paid search is so effective across multiple sectors is inventory quality. Because people are searching for a specific item, action or service ad targeting is easy. You can buy lower funnel search terms that will convert into sales.
However, this key benefit has been eroded by the search engines themselves. The carpet hasn’t quite been pulled from under savvy search advertisers just yet. But there is definitely some dilution in the mix.
Changing what search terms are triggered by exact match and also pushing Enhanced CPC puts more control in the hands of the search engines.
Microsoft Ads has totally eliminated Manual CPC while Google has used “negative UX” to bury the option behind a plethora of drop-down menus.
If I were a search engine I would resist this and always allow for Manual CPC and strict exact match rules.
It might work in the search engines favour in the short term but in the long term, it will actually reduce the amount of ad budget spent on search.
Anyone who has sat in a marketing meeting and been involved in the budgeting process will know what I am talking about here.
Bottom line, never kill the goose that lays the golden egg. Do not mess with inventory quality.
The Second Price Auction and The Fairest Pricing in Advertising
Most search engines operate their ad platforms using a second price auction. This means that the top bid is just marginally above the second-place bid.
Unlike blind auctions where you pay the full amount of your bid if it wins. Second price auctions give you a much more market influenced price.
This is great for advertisers and is key to the success of search engine advertising. Ultimately you pay a fair price for the clicks you buy.
The more businesses looking to buy clicks the more revenue the search engine will get through inflated CPCs. It is market-driven.
How I Would Increase Revenue If I Were a Search Engine
So, what would I do if I had my own search engine?
Here are a few ideas.
Free Credit to New Advertisers
Putting a cynical hat on, and remember this is a purely fictitious scenario and that no real-world search engine does this to my knowledge, giving away free credit will distort the market.
Essentially this approach manipulates the second price auction system to increase revenue from current auction participants.
Say “Business A” depends on paid search for the bulk of their sales. My search engine would prospect a similar company in the sector that is currently not advertising on my platform.
I would then give them free credit to try my system. However, I would be careful not to give too much credit as to increase the required bids of Business A so high that it becomes too expensive for them to get a return. Just to get them to spend a little more.
I would work with the new business to use this free credit to target search terms occupied by Business A, therefore, inflating the price.
I would hope the outcome would be the following:
- Increased revenue from Business A in the short term by increased bids to maintain traffic levels from converting keywords
- Business B will see the benefit and start allocating budget and resources into paid search.
- Competition between Business A and Business B will attract Business C and now we have an auction on our hands.
Provide Free UX Resources and Support
As Paid Search Managers we hate to say it but a larger part of the success of a paid search campaign can be attributed to UX, a good offer and brand awareness than to what happens on the ad platform.
Conversion rates are key. As a result, I would provide one to one support to help businesses improve their conversion rates.
This is likely to be the best ROI my search engine company will achieve. So, weekly calls on UX, comprehensive courses on improving conversion funnels and on-page copy will be front and centre.
We might even offer to create their entire website for free!
Buy or Develop a CRM Platform
CRM is the cornerstone of all paid search campaigns these days. Please let me know if you have found a product where you can get your ad spend back after one transaction. They are hardly any left.
Customer Lifetime Value is key. Investing in this will increase the revenue from customer acquisitions which will, in turn, increase the level at which CPCs are sustainable.
The trick is to make sure that all participants see an improvement in customer revenue, not just the top few.
Run Seminars for CFOs
Many CFOs look at advertising as a cost (not all CFOs mind you). However, in fact, it is an investment. I would develop resources and seminars for CFOs exploring the investment side of search marketing.
How to run paid search campaigns using NPV or annualised ROI targets etc.
The misunderstanding most people in the marketing department have is that all CFOs just consider historical performance this is at odds with the DNA of Paid Search. You see, paid search is all about future revenue.
By understanding that paid search has acquired an asset that will deliver revenues over many years to come reframes the decision-making process.
Us marketers have nobody to blame but ourselves. Now with my search engine’s CFO programme, we will have no excuses.
Audiences – Make it Easier to Action
Outside of gambling, audiences play a huge role in paid search. However, they have been shoehorned into the bidding architecture after the fact.
I would make it easier for bids to be adjusted for different audiences. I would also look at ways to build suggested audiences from website data using AI.
This improvement in functionality and the UI would make it cheaper for businesses to roll out comprehensive audience targeting and bidding strategies. As a result, they will have more budget to spend on their campaigns.
As members of the marketing team, our actions are held to account more than any other department. Also, we must account on a granular level for the budget we have spent.
Unfortunately, when grilled by finance on why we decided to use ROAS bidding but still the targets were missed we don’t have much recourse.
Yes, we can send reports after the fact but the impression will be that we just set it to autopilot and didn’t look for two weeks.
So, I would have a “logic” report. Hold your horses Data Scientists, I know that we can’t really know how a neural network works, but the key here is playing office politics. It’s giving humans comfort and also showing that there is some form of methodology at play.
This report would show why automated targets were missed.
As you can see there are things that can be done to increase ad revenue for search engines. However, the top of the list has to be marketing education across your organisation. As we know, “Marketing is Strategy” while “Advertising is Action.”
Finance must come with proper targets such as NPV for CLV campaigns and target annualised ROI for transactional campaigns (if they still exist). Customer retention also must play a part. Development must play a part and so must design.
Actually come to think of it scratch all that I have outlined above.
If I wanted to increase revenue for my search engines I would forget about the marketing team and build relationships with all other teams in the business. I would explain to the key decision-makers one to one how they can contribute to marketing as a whole.
I would help build and support the “assist infrastructure” around the PPC team. The better client companies/advertisers are at the “assist infrastructure” the more revenue my search engine will get.
And to think you could have just read the last two paragraphs! Agh well, sorry about that. (Well actually everything in this post is about building the “assist infrastructure” to make your paid search campaigns a success which will have a knock-on effect of increase the amount you spend on paid search)