Paid Search 101

First off, an apology: I’ve been away for awhile and let my blog drift by the wayside. Some brand manager I am, putting my blog off to have major hip surgery.  (In all seriousness, I am pretty irritated that I’ve gone this long without posting, but hey, I’m on the mend and they had the technology, so it worked out).

Now, for the goods. I’ve been asked a few times lately for a primer to paid search. This is going to be a very basic introduction (as in, discussing what paid search is and a rudimentary explanation of how it works) so it might bore some of you, but I’d rather start at the beginning for those of you who aren’t as familiar with this sort of campaign.

Search engines have two basic kinds of listings– those that advertisers pay for, and those that they don’t. These paid listings are called sponsored listings on Google, Yahoo and Bing. Exhibit A:

The advertiser builds a list of keywords (and decides how loosely they want their ad to be associated with similar terms) and uploads them to the search engine. The system is an auction-based environment, meaning that the advertiser sets a maximum cost-per-click (frequently referred to as CPC). The advertiser also sets the daily budgets (either manually or through a technology called bid management) so the campaigns don’t exceed the desired spend. The search engines determine which ads show in the highest position using a combination of the advertiser’s maximum bid and something called the Quality Score, which is essentially the ad’s history and rewards the most relevant advertisers. The advertiser is only charged when a user clicks on the ad.

(And for the record, Google’s official stance is that the ranking of an organic search result has no bearing on the ranking of any ads, and vice versa. This is a very contentious topic, however, and many people feel that there is a relationship. More to come on that in a separate post).

Although the premise is simple, there are a number of ways to optimize a paid search program. For example:

• Negative keywords: Adding negative keywords helps advertisers to focus on the right customers. If a paid recipe site, for example, wanted to bring users to its page to purchase individual recipes or become a member, it wouldn’t want someone who was looking specifically for free content. Adding “free” as a negative keyword would mean someone searching “free chocolate chip cookies recipes” wouldn’t see this particular advertiser’s ad.
• Bid adjustments: Because paid search is an auction environment, advertisers constantly monitor bids to determine what is the most profitable. Return on Ad Spend (ROAS) is a major key performance indicator in paid search, because it lets us know how a keyword is returning versus how much we’re spending on it. It’s not uncommon for bids to reach more than $10.00 a click in very competitive, high-reward categories (medical and law categories are two common examples). Ultimately the advertiser needs to decide what a click is worth to them.
• Keyword additions and pauses: As an advertiser learns more about what works, they can add or remove keywords accordingly. Tools like the Google Keyword Tool and Microsoft’s Keyword Forecast AdLab can help identify additional keywords based on volume.

If you’re interested in learning more about paid search, there are a ton of resources online (Google, specifically, has an extremely robust training program for its paid search program, Adwords. They also have a Small Business Center which explains Adwords in terms of what you can get as a small business owner which is easy to understand and pretty simple to use). And stay tuned- paid search is here to stay, so I intend to write much more about it in the coming months.