Keyword Advertising on a Cost-Per-Click Model

By Deborah Kilpatrick
Posted Sunday, February 8, 2004

Fact:Of all Internet users in the United States, 94% use search engines to find information on the Web (Nielson-Net Ratings), and 81% who use search engines find the information they're looking for every time they search (NPD). Considering these numbers and how relatively inexpensive and risk free Internet advertising is compared to traditional media, it is a wonder why more businesses are not optimizing their sites on search engines to strengthen their online presence.

Why Internet Advertising?

Reaching the ever-increasing number of online users is critical to establishing your corporate presence on the Net. Corporate websites should be information rich for both returning and new users, and should effectively communicate your company's values and offerings. Attracting clients or potential business partners to your website is the key to forging long-term relationships, and to bolstering online sales. Listing your site on search engines with a broad reach is therefore imperative if you wish for your product and/or services to be found. Search engines provide the technology to bring your site to people who are actively seeking your offering. Since over 80% of web site traffic is guided by search engines (Forrester Research), the question remains: assuming you are on all the right search engines, how do you use your keywords and creatives effectively to draw clients, partners and industry experts to your site?

Building A CPC Keyword Campaign

The keywords you choose will be subjected to different pricing models depending on where you advertise. The two most popular pricing models are "bid-for-placement" and fixed CPC (Cost-Per-Click) - both models only charge you when a searcher clicks through to your site from one of your listings. This translates to little risk in comparison to traditional advertising media, which charges strictly on demographics, circulation, and the likelihood of how many people will see or hear your message. Paying for a "cost-per-click" referral to your site is akin to having someone deliver a bus load of people to your store and charging you pennies for every potential customer who steps through the door. In this scenario, even if two people purchase, you will have been successful in your online marketing efforts.

The first of the above-mentioned pricing models is "bid-for-placement", in which each of your selected keywords has an individual price in an auction-style environment. The higher you're willing to bid on a particular keyword, the higher your listing. This system provides lots of flexibility by allowing you to set specific bid-prices for each keyword - though it can become cumbersome if you have many keywords and phrases.

Another more efficient system takes a step back from pricing individual keywords and assigns a fixed CPC to all of your keywords and phrases. CPCs are determined according to the category in which your site falls and the market value of that category. This means that all advertisers in the same category pay the same price and allows for smaller sites with limited budgets to compete with large sites that tend to have much larger marketing budgets and that can easily out-bid them in the bid-for-placement model. What can make this task difficult is the average price in the industry for CPC advertising (including categorization) is fragmented and the CPC can range from 1 cent to 2 dollars depending on the industry (Click Z).

THE STRATEGY

Keyword Advertising

Keyword building is the backbone of your online advertising campaign - it is these words that will lead the millions of online searchers to you. However, there is more to building keyword lists than just coming up with a few words that describe your product or service offering. The market presently indicates that generic terms such as "investment" and "insurance" are highly valued and that more obscure, but targeted keywords are valued much less (e.g.: "Atlanta Georgia car insurance"). However, contrary to what the market is determining, searchers are becoming savvier and are using more specific keyword combinations to find what they're looking for. Results show that 45% of searchers use a combination of keywords (key phrases), 28% use one keyword, 18% search by a pre-defined option (such as browsing through a directory category) and 9% search by typing in a question (NPD).

You therefore have two choices when it comes to creating a keyword list. The first is listing generic keywords in order to generate the most traffic possible to your site, resulting in high click-through ratios, but low conversion rates. The other option is listing targeted keywords that will drive targeted traffic to your site, resulting in traditionally lower click-through rates, but higher conversion ratios ratios (e.g.: "Atlanta Georgia car insurance").

For example, if you are selling insurance services in Atlanta, Georgia and are only capable of delivering your services there, then you may not want to list the generic keyword phrase "car insurance". You would receive a high volume of click-throughs, but from geographic places you would not logistically be able to supply. This is a waste of your advertising dollars. +The number of keywords that you list on a search engine is also crucial to your online success. Each additional keyword and keyword phrase you suggest will increase your site's chances of being found. Think of it as, not only placing as many hooks as possible in the lake, but also making sure they are of the right type to attract the clients you want.

Powerful Creatives

Almost as important as the keywords are the creatives that support them. In the search industry, creatives refer to the titles and descriptions that expand upon the keywords you select. They provide a small glimpse of what your website has to offer. It is important to be as clear as possible for a number of reasons.

First, it is preferable not to use superlatives, caps or exclamation marks in your titles because this reduces the validity of your offer and is not viewed as a professional listing. Second, it is suggested that the title and the description include the keyword it is associated with - this is to reinforce that the result is relevant. It should also expand in as few words as possible what the website is offering. Using the car insurance company as an example, the title should have the following elements: "Company ABC car insurance for residents in Atlanta, Georgia". The description, as an expansion of the title, should have the following elements: "Reputable car insurance solutions that are affordable and offer excellent coverage". Using this method of advertising on search engines, you are sure to attract your target market to your site, (from a purely geographic demographic).

Relevant URL's

In addition to using specific and relevant titles and descriptions, the URL that you submit to the search engine must also be targeted. Ideally, the user should go to the exact page that they are looking for on the first click. For example, if the user is searching for a specific type of insurance among your assortment of solutions, the submitted destination URL should take them directly to the page describing the solution in question. Internet searchers have low patience levels, and, if they cannot immediately find what they are looking for on your site, they will give up and move on to the next result on the list.

Added Benefits of Advertising Online: Tracking your ROI

You can analyze down to the penny your increase in sales through keyword advertising by tracking the conversion rates (sales generated from clicks) for each ad dollar that you spend. You only have to create a specific URL per initiative, pointing to your website so that you can track which marketing effort the click is coming from. You will then be able to monitor someone clicking on your advertisement, going to your site and converting into a sale. This information will notify you which keywords, creatives and marketing efforts are producing an acceptable ROI and which efforts are not.

About The Author
Deborah Kilpatrick is the Product Marketing Manager of Mamma.com. She holds a Bachelor of Commerce in Marketing from the John Molson School of Business at Concordia University.