Indeed, for many advertisers and many verticals, SEM may no longer be the best channel for laser-focused advertising. In this article, I look at five types of online targeting and compare the functionality of SEM versus two other popular marketing channels – self-serve display advertising (Google Display Network) and programmatic display advertising.

Types Of Online Targeting

Before I delve into the specific targeting features of online marketing channels, let me suggest a framework for evaluation. Broadly speaking, there are five types of online targeting currently available to online marketers:

1. Query – what is the user searching for?
2. Location – where is the user located?
3. Time – what time of day, day of week, and time of year is it?
4. Device – are they on a mobile phone, tablet, or computer (and what is their operating system and carrier)?
5. Behavioral – who is the user, demographically, or psychographically? Note: this is the broadest of my five factors, since I’m including data like offline purchase behavior and social sentiment in this category – over time, I could see this factor broken into several separate groups as targeting matures.

Round 1: Query-Level Data

Query-level targeting has always been the selling point of SEM, and AdWords (and Bing/Yahoo, of course!) are still the clear champions when it comes to targeting users based on queries. That said, GDN does interpret the semantic relevance of a website to allow advertisers to try to use query-level data in display; and, third-party search retargeting companies like Chango, Simpli.fi, and Magnetic offer query-like targeting throughout the display ecosystem.

But let’s face it, query-ish display targeting still pales in comparison to the real deal – SEM! If you are marketing an established product (i.e., something people would be searching for), SEM should be your most important channel.

Winner: SEM!

Round 2: Location Data

Location targeting is vital for local businesses with limited geographic reach, but also very important for any business that might see differences in purchase behavior by geography. In general, geography can be inferred by one of five ways:

1. Geo-modifiers in a query (e.g., “Chicago mortgage rates”)
2. The IP address of a user’s device
3. The semantic content of a page the user has recently visited
4. A user’s self-defined location when s/he registers online (such as signing up for a Gmail account).
5. First-party or third-party data

AdWords uses all of these geographical inferences except for first - or third-party data – when targeting users on desktop search. This is both good and bad news. On the plus side, Google has a lot of different ways to infer a user’s location, which can be helpful when someone a block from your pizza restaurant searches for “great pizza restaurants for lunch” and you want to market to them.

On the other hand, if Google uses the wrong inference to target the user (e.g., the user is registered on Gmail in your home town but happens to be 50 miles away when doing the pizza search), you might end up with unprofitable geo-targeting. Google has rectified this dilemma – at least to a degree. AdWords now allows advertisers to choose whether they want to target only users who use a geo-modifier, or who are in a specific location, or both.

While GDN and Display cannot use geo-modifiers in a query as accurately as AdWords, they do allow for better usage of first- and third-party behavioral data. To clarify what these two forms of data are, first-party data is information collected directly by an advertiser (i.e., if a consumer has purchased something in the past from you), while third-party data is generally anonymized data collected and sold to the advertiser (e.g., based on our data, this user buys a lot of dog food).

GDN allows advertisers to access a limited set of third-party geographic data via their “interests” and “topics” functionality. In the example below, you can select people who are “interested” in a particular geographic region of California (which I assume is more or less synonymous to that person living in that region):

You can also “sort of” use first-party targeting in GDN via remarketing. For example, if you have pages on your site that are geo-targeted (for example, “Mountain View pizza directions”), you could, in theory, limit your GDN advertising exclusively to people who visited that page via remarketing, effectively creating a Mountain View-only campaign.

Ultimately, however, this quasi-behavioral targeting on GDN pales in comparison to what is available to advertisers via programmatic display buying on ad exchanges. Sophisticated display advertisers leverage “data management platforms” to leverage reams of first-party data and multiple third-party data sources to create hyper-local campaigns directly targeted to specific user groups (or even individuals).

In other words, in a well-executed display campaign, it is possible for the advertiser to actually know the user’s home location (via first-party data), broad interests (via third-party data), where they are currently located (via IP address), and – to a lesser extent – the geographic nature of the content the ad is appearing adjacent to.

Given the high relevancy of geo-modifiers in search and the equally high accuracy of first-party data in a programmatic display campaign, I’m calling this one a tie between AdWords and Programmatic Display (sorry GDN)!

Round 3: Time-Of-Day, Day-Of-Week, Time-Of-Year

AdWords and GDN have decent day-parting functionality, though it is a bit buried in the settings (perhaps on purpose, so as to avoid melting the brains of newbie SEMs).  Effectively, you can make 49 automated bid adjustments a week by time-of-day or day-of-week (seven per day):

For most advertisers, I suspect that this is more than sufficient. That said, programmatic display buying does provide more time-based granularity via “real time bidding ” (RTB for short). As the name implies, RTB allows advertisers to make ad buy decisions every time an impression is available for purchase. In theory, this means that advertisers can make millions or billions of decisions within a 24-hour time period.

In reality, I’m not convinced that demand side platforms (DSPs) – the technology that programmatic buyers use to buy advertising in real time – are truly analyzing whether an impression at 6:01 am and 6:02 am deserve different bids based on time-of-day, but there certainly is more time-based functionality available via display than the 49 time slots currently available via AdWords and GDN.

That said, it’s important to note that Google’s conversion optimization tools – the “conversion optimizer” on AdWords and the Display Conversion Optimizer (DCO) on GDN – do make changes to bids in real time, and have the potential to adjust bidding more than the 49 times you are allowed via the self-serve tool.  So, in a way, AdWords and GDN advertisers do have access to an RTB tool, just without the ability to make manual adjustments that a display advertiser can make with a DSP.

Results: A Three-Way Tie! (Overall Score right now is AdWords: 3, Programmatic Display 2, GDN 1)

Round 4: Device Targeting

Once upon a time, AdWords and GDN had AWESOME device targeting. It seems like it was so long ago . . . Unless you have been living under a rock without Internet access, you should know by now that Google’s new “Enhanced Campaigns” settings will effectively remove almost all the device granularity previously available to advertisers. Just to show the difference graphically, here’s the before and after functionality:

Before:

After:

It turns out that the level of targeting Google used to offer was superior to the current targeting available in programmatic display buying; but, as a result of enhanced campaigns, programmatic buying is now the superior targeting option. With programmatic buying, you can still target users by device and carrier, something that is now not available in AdWords.

So, with a heavy heart, the winner in this category is: Programmatic Display

Round 5: Behavioral Targeting

Going into the final round, we have a two-way tie for first place – Google 3, Programmatic Display 3, and GDN 2. It’s still a wide-open race!

Behavioral data in AdWords is limited to non-existent. To my knowledge, Google currently does not allow advertisers to leverage third-party behavioral data in their search ad buying (though I have heard rumors of betas that do this). On the first-party side, the only way to leverage actual knowledge of user behavior is to use remarketing lists for AdWords, but – as with Google’s other remarketing products – this is only first-party in the sense that you know a user visited a page of your site.

GDN goes a step further than AdWords by providing the aforementioned “interest” and “topic” third-party targeting options, though you are limited to Google’s data only (not the case with programmatic buying). And, on the first-party side of things, you are limited to remarketing only.

Programmatic display buying has an advantage over AdWords and GDN on both the first-party and third-party behavioral side. First-party data in programmatic buying has the potential to be much richer than just retargeting – for example, a retailer could target sets of users based on a “recency, frequency, and monetary” methodology, with the data derived from actual customer purchase behavior. On the third-party data side, there are dozens of behavioral data companies more than willing to sell advertisers slices and dices of data.

The winner of this round, with a technical knock-out, is Programmatic Display buying.

Tallying Up The Scores!

The final result: Programmatic Display 4, AdWords 3, GDN 2 – congrats to programmatic display buying! Now, before you go and scrap your SEM campaigns and dedicate 100% of your resources to RTB and DSPs, let me state for the record that there are still many – many! – products and services that will perform better in SEM than in display, simply because SEM is almost always at the end of the conversion funnel, and display is often closer to the beginning.

The best result for almost any campaign is to max out SEM to capture folks in the last stages of purchasing, but to also identify targeting upstream opportunities on GDN and programmatic display to fuel additional demand.

I recognize that this has been a bit of an epic post (anyone out there still reading?). For a graphical description of the targeting benefits of each of these channels, check out the image below or download the chart here.

Indeed, when it comes to SEM, benchmarking seemingly plays a big role. It’s hard to go through any SEM conversation without the mention of “deltas” and “year-over-year” data being discussed.

I’ve noticed, however, that many SEMs only take benchmarking half-way – they benchmark their internal performance, but fail to properly benchmark their performance vis-à-vis competitors or the overall SEM marketplace.

To understand the difference, consider this sports analogy. You are an aspiring 100-meter sprinter. As such, you train relentlessly day-in, day-out. On your first day of training, you clock a time of 19 seconds. After one week, you’ve reduced your time to 16 seconds, and after three months, you are down to 13 seconds. From 19 to 13 seconds is not too shabby; that’s a delta of 32%! This would be what I call “internal benchmarking.”

Now, let’s say that you decide to try out for the Olympics. You register at a regional qualifier event, ready to take that first step toward a gold medal. The gun goes off and you achieve another personal-best, 12.5 seconds! Unfortunately, the rest of the field comes in at between 9.8 and 10.1 seconds, so they were already doing interviews by the time you crossed the finish line. That’s an example of “external benchmarking.”

Internal SEM Benchmarking – It’s Pretty Easy

There are tons of tools available to conduct internal benchmarking of your SEM accounts. Inside AdWords, for example, you can easily benchmark virtually any metric against the prior period, the same period last year, or even a custom benchmark by simply turning on the “compare dates” feature in the date range drop down, as shown below:

I also like the dimensions tab in AdWords, which doesn’t do “delta” benchmarking, but does allow you to compare days of the week, geographies, devices, and other levers quite easily.

A sample of some of the things you can benchmark via dimensions is shown below:

So, if you simply want to know whether your profit has improved versus the same time last year, or whether a certain geography performs better than another, basic tools available inside Google and Bing will give you good data in short order.

External Benchmarking – Ah, There’s The Rub

For a lot of SEM-driven businesses, year-over-year growth is not the ultimate metric of success. That’s right – you heard that correctly – your SEM profit could grow substantially year over year and that might actually be a sign of failure.

How so? Well, let’s say you are in a fast-growing industry, like mobile app development. If the market is growing at 100% a year but your business is only growing at 50% a year, you are growing your business but losing market share.

The same scenario exists in search engine marketing; if you are doing a B+ job of SEM management and someone else is doing an A+ job, that effectively means that you are underperforming relative to your competition.

The challenge with external benchmarking is figuring out if you are actually the B+ or A+ SEM. Unlike internal benchmarking – which, as shown above, is easily measurable through deltas – you can’t just ask your competitors for a login to their AdWords account and instantly determine who has the better-optimized account.

Here are a few external benchmarking techniques that can collectively help you arrive at a grade for your SEM campaigns:

1. The Lin-Rodnitzky Ratio. At PPC Associates, we’ve developed a simple way to calculate the health of an AdWords account, which we call the Lin-Rodnitzky Ratio(or L/R for short). The ratio is simply the CPA of all queries in your account with at least one conversion divided by the ratio of all queries in your account, regardless of whether a conversion occurred.

So, for example, if the CPA of 1+ conversion queries is $25 and the CPA of all queries is $75, the ratio is determined by dividing $75 by $25, for a score of 3.0. What we’ve generally found is that a well-optimized account has an L/R ratio of between 1.5 and 2.0.

Ratios over 2.0 tend to indicate excess fat in the account and ratios under 1.5 indicate an overly conservative account (usually too much focus on brand terms). You can learn more about the Lin-Rodnitzky Ratio here (pdf).

2. SpyFu “Kombat.” SpyFu has a nifty tool called Kombat that allows you to compare your keyword set and ad spend versus those of up to two competitors. While I find SpyFu (and all keyword research tools) to be “consistently inconsistent,” I like the Kombat feature because it is a quick way to see whether competitors are doing something that you aren’t.

For example, if two of your competitors are heavily investing in a certain set of keywords and you are not, that’s usually a sign that you are missing an opportunity!

3. SEM Growth vs. Industry Growth. As I noted above, if the growth of your overall industry is outpacing the growth of your SEM revenue and profit, that may indicate that you are not maximizing your SEM opportunity.

This is particularly relevant when you find that you always seem to be outbid by the competition for top keywords. In such an instance, you are either missing some SEM techniques (e.g., the right ad text to achieve good quality score, proper account structure, negative keywords, etc.), or your company is falling behind your peers (which is a problem that the SEM often cannot fix!).

4. SEM Growth vs. Other Channel Growth. If other marketing channels are rapidly outpacing the growth of your SEM campaigns, this might indicate a problem with your SEM strategy. I list this test last because channel growth is frequently driven by externalities that have nothing to do with the quality of strategy or execution.

That said, an SEM campaign that is consistently underperforming on a year-over-year basis against other channels may be a sign that some tweaking needs to be performed.

All Benchmarking, All The Time

SEMs are in high demand today because we are data-driven and ROI-positive marketers. We are “profit centers” instead of “cost centers” (hello, branding agencies!). As such, benchmarking is a key tool in any SEMs toolbox.

It’s time, however, for us to up-level our benchmarking game. Internal benchmarking alone is reminiscent of Plato’s allegory of the cave; without external comparisons, it is impossible for us to differentiate between true success and the illusion of success. It’s time we all leave the cave!

Image via Shutterstock

The in-house versus agency debate is largely over because for 90% of businesses, it is no longer possible to run a significant (large budget/large volume) online marketing program without agency help.

Since I’m an online marketing agency CEO, it’d be fair of you to accuse me of bias and self-interest in making this statement, but please put away the rotten tomatoes until you have at least heard my argument. For what it’s worth, it’s an informed one; I spent eight years as an in-house SEM and used to hate agencies.

The argument is as follows:

Online marketing today is more complex and convoluted than it has ever been. As such, to conduct a robust and effective marketing campaign, a business needs lots of experts, lots of tools, and, well, lots of help. Only the very largest spenders can afford to maintain this army of experts internally, which leads to the need for outside help.

In this post, I’ll describe the layers of today’s online marketing landscape – and explain how your company can evaluate its needs and decide which kind of agency it might need to bring on.

The Five Vectors Of Online Marketing Complexity

As I see it, online marketing success requires execution on five vectors, which I’ll describe below. If you currently work for an in-house marketing team, how many of these vectors does your team handle on their own? My guess is that you do some of these well, some of them not as well as you’d like, and some of them not at all.

Vector #1: Multiple Marketing Channels

I was reared as an SEM expert, and I’d like to think I know a fair amount about this space. Of course, SEM is just one of many channels that make up online marketing today. The list includes:

• SEM
• SEO
• Facebook PPC
• Facebook Ad Exchange
• Facebook (earned)
• Twitter PPC
• Twitter (earned)
• LinkedIn
• YouTube
• Google Display Network
• Ad Exchanges
• Direct Media Buys
• Email Marketing
• Affiliate Marketing
• Pinterest

Vector #2:  Big Data

Cookie-based data is great, but it is no longer the only data source that savvy online marketers are using to analyze results. Here are a few more that are gaining a lot of traction:

• In-store data
• Digital fingerprinting
• View-through incrementality and attribution
• Cross-device interaction
• Database-driven offline conversions
• Lifetime value

Vector #3: Tools

If you enjoy product demos of technology, online marketing is a great space to be in right now. The display landscape has dozens of tools, and the search world isn’t too far behind. Among the many tools that online marketers must evaluate today are:

• SEM campaign management software
• DSPs
• Ad serving
• Attribution
• Tag management
• Creative optimization
• Reporting
• Facebook optimization
• Analytics
• Call tracking
• SEO platforms

Vector #4: Devices

Desktops are no longer the only game in town. Just a few of the fun devices that we need to create optimized funnels and ads for these days include:

• Desktops
• Tablets
• Smartphones
• Feature phones
• Internet-enabled TVs
• Google Glass (well, maybe someday)

Vector #5: Geography

Technology has made the world flat, enabling small companies to build a global footprint faster and easier than any other time in history. But with international expansion comes additional challenges, like:

• Ad copy and landing page localization
• New marketing channels (think Baidu, Yandex, and Naver, for example)
• Different time zones to manage (want to stay up 24/7?)
• Different laws and regulations

The In-House Solution: Now, Discover Your Strengths!

A jack of all trades is a master of none. This adage applies equally to both ad agencies and in-house teams. Any agency that promises you that they can handle the 40 or so challenges elucidated above is selling you a bill of goods; it is simply not possible to be an expert at all things marketing.

Similarly, unless you work at Amazon or eBay and have an enterprise level online marketing team of 50 or more people, it’s unlikely that you can really handle all of these challenges on your own.

As such, to master online marketing, you need to find outside help, which almost always means a combination of technology providers, agencies, and consultants. So the question is not “whether” you need an agency, it’s “which” do you need? To keep with the “vector” theme, I have four more vectors through which to evaluate an in-house team’s agency needs.

Vector #1: Your Company’s Core Competencies

Amazon decided that fulfillment was core to their business, so they kept it in-house. Zappos values customer service and keeps that as an internal function. What does your business value? Are you a tech-driven company? If so, perhaps your data analysis and tools selection should be managed internally, but your marketing should be outsourced.

If you are content-driven, keep earned media internally; whereas, a direct-response marketing shop might want to keep paid media inside its walls. In sum, craft your in-house marketing team to mimic the core strengths of the company and consider outsourcing the tasks that aren’t.

Vector #2: Your Marketing Team’s Expertise

Malcolm Gladwell popularized the concept that to become an expert, a person needs 10,000 hours of experience. Expecting your team of very-smart, but inexperienced, marketers to handle new channels with aplomb is like expecting them to learn to fly a commercial airliner after a few lessons.

Google, in particular, has worked hard to convince marketers that AdWords is easy to start and easy to manage (“start with just $5!”). AdWords – and every other online marketing channel, tool, and task – are all complex. Agencies offer “for rent” expertise in areas where your hiring budget for experts falls short.

Vector #3: Cost-Benefit Analysis

Believe it or not, there are times when working with an agency is cheaper than keeping everything in-house. For example, agencies can negotiate technology deals across all of their clients at a rate that is much more affordable than what you could negotiate for your individual company. And sometimes, hiring an agency to handle a few marketing challenges is outright cheaper than bringing on full-time employees to do the same tasks.

Vector #4: Does It Matter?

To be clear, I am not making the argument that online marketing success can only be achieved by implementing all 40 of the points described above. Indeed, many of these points are likely totally irrelevant to your business. And many of these might be “nice-to-haves” but not vital to your success.

So, just because you could create a mobile-ready micro-site in 25 languages and run a StumbleUpon campaign to drive visitors to the site doesn’t mean you should! Many agencies are more than happy to sell you something that wins them a shiny award but does nothing for your bottom line.

Are You Convinced Or Am I A Shill?

As I said earlier, I worked in in-house marketing for eight years prior to founding an online marketing agency. In general, I hated agencies when I was on the in-house side. But, when I left in-house for the agency dark-side in 2008, it was still more or less possible to manage all things online marketing in-house with just a few people.

Fast forward to today, and the marketing world is exponentially more complicated than it was then (just look at how much more complex Google AdWords is today than it was in 2008, for example). New devices, new channels, new technology, more data and more geographies – this is no longer a task that a few smart folks can handle on their own. So, pick your battles to fight internally and pick up the phone to find great outsiders to help you fight everything else if you need additional resources.

Let the rotten-tomato throwing commence!

John Battelle has called a search engine a “database of intentions,” but that database is often fuzzy, to say the least.

In many cases, it would be much easier for marketers to know who the user doing the search was, as opposed to for what they were searching. Take the two examples above: if you knew that the searcher was a 19-year-old college student whose favorite brands were [Axe deodorant] and [Bud Light], you could probably determine quite quickly whether either query was right for your advertising budget.

But, with the exception of the limited use cases of Google’s RLSA (retargeting lists for search ads), the ability to fuse demographic or behavioral intent with query data does not exist on search engines.

In the last few months, however, social networks – led by Facebook and LinkedIn – have rolled out targeting features that enable advertisers to get very close to answering the “who” question. Importantly, these tools work especially well for B2B marketers, simply because they enable advertisers to exclude consumers (or just include businesses).

While still in their infancy, these new targeting tools are opening up big B2B opportunities online. If you’ve been frustrated by too many double-entendre keywords in your SEM campaigns, social media could be a better use of marketing dollars.

LinkedIn: Using Endorsements, Groups & Demographics For Fun & Profit

With over 200 million users, the odds are pretty high that if you are trying to reach a business professional, you can probably find him or her on LinkedIn. When LinkedIn’s self-service advertising platform was originally launched, advertisers could only target based on a LinkedIn user’s self-identified data. I say only because even this data is quite robust. Fields include:

• Languages spoken (I put “Old French – 842-ca.1400” on my profile, but no one has targeted me in that yet)
• Company or type of company
• School(s) attended
• Seniority
• Gender
• Age
• Geography (down to a city)

LinkedIn then upped the ante by allowing advertisers to target users based on their LinkedIn group membership as well. Since many groups are narrowly focused around specific business issues and needs, targeting groups (in combination with demographics) is a great way to find users specifically looking for what you might be selling.

As example, I typed in [data warehouse] into the groups search box on LinkedIn and found more than 250 groups, some of which had over 20,000 members:

In the last few months, LinkedIn introduced “endorsements,” whereby your peers can endorse you for a set of skills. Shortly after rolling out endorsements, this, too, was added to the self-serve ad tool (described in the tool as “skills”), effectively creating a crowd-sourced targeting tool.

Put these three elements – profile demographics, group membership and endorsements – together and you can get pretty darn granular (though note: you must target at least 1,000 LinkedIn users per campaign).

To show you an example of what this looks like, I recently created a LinkedIn campaign targeting PPC experts at marketing agencies in the US at a manager to VP level (as a way to try to recruit people to my agency). I got a list of about 1,200 perfect candidates to market to.

Facebook: Demographics + First Party Data + Search?

Facebook has also been busy adding more refined targeting options to its original ad platform. The first iteration of Facebook targeting allowed advertisers to target based on self-reported data about users, including:

• Geography
• Age
• Gender
• Languages spoken
• Marital status
• Sexual orientation
• School(s) attended and current education status
• Company
• Interests on Facebook
• Connections on Facebook

Again, not too shabby! Since that initial launch, however, Facebook has added two new powerful tools: FBX – which allows you to retarget your Web visitors on Facebook – and Custom Audiences, which enables advertisers to upload a list of email addresses to Facebook and market to anyone on Facebook who has used one of these email addresses to sign up for Facebook.

While you can’t currently fuse Facebook demographic data with FBX retargeting; with custom audiences, you can! So, if you only wanted to target folks that had signed up for your newsletter *and* are married, went to the University of Iowa and are men, voila! – custom audiences combined with self-reported demographic information gets you that deep!

And, let’s not forget the elephant in the room – Facebook’s recent launch of “Graph Search.” Graph Search allows users to run searches on Facebook and get results based on their social graph. So, doing a search for “sushi in San Francisco” would not only give you a list of sushi restaurants, but also tell you which of your friends visited them recently.

While you can’t currently advertise on graph search (and indeed, most users don’t even have access to the feature yet, anyway), most advertisers assume that Facebook will soon roll out “search ads” on Graph Search. Combine the 1^st-party data of Custom Audiences, the self-defined demographics of Facebook profiles, and the intent of a search query and, well, you just might have found the Holy Grail of online advertising!

And Don’t Forget Google

Of course, Google isn’t sitting idly by and letting LinkedIn and Facebook own “who-based” B2B marketing. Google Plus is already integrated into AdWords, RLSA allows for limited 1^st-party data, and there’s no doubt there are many more plans at the Googleplex to fuse behavioral data and search intent.

Google already offers B2B behavioral targeting opportunities on the Google Display Network (GDN) and has really improved the ease-of-use and granularity of their remarketing (retargeting) on GDN, as well.

Compared to the social networks, Google has always taken a much more conservative approach to user privacy, which may limit the amount of behavioral data they will share with marketers; but at the end of the day, if Google is losing wallet share to other channels and the cause of this loss is better targeting, you can expect Google to respond with rival products on search as a result.

And don’t get me wrong, there are still plenty of highly-targeted B2B-only queries that get decent volume on AdWords, so this is definitely not a zero-sum game.

Assuming that all this data (and all of these channels) doesn’t either overwhelm marketers or freak out consumers, the combination of accurate behavioral and demographic data with search query intent is a pretty exciting opportunity for B2B marketers. Merging “who” with “what” and “where” on social networks enables advertisers to target business customers with incredible precision. It’s a very good time to be a B2B marketer!

Image via Shutterstock

What, you ask, does this have to do with search engine marketing? A lot, actually.

This trip has reminded me of something very important to all marketers: the difference between a one-time purchase and a lifetime customer.

In the parlance of online marketers, I’d describe this as the difference between your cost-per-acquisition (CPA) metric and lifetime-value (LTV) metric.

CPA Vs. LTV

As a brief refresher, CPA is the cost you pay to acquire a customer via SEM (many retailers use ROI or ROAS (return on ad spend) to measure this initial purchase); LTV is the total expected value you get from a customer over his/her lifetime.

Let me quickly describe the on-board experience on this cruise in more detail. Included in your fare is your room, meals, and the entertainment. Beyond those benefits, the rest of the cruise seems to be one ongoing attempt to get you to spend more money. A few examples:

• Want beer, wine, soda, or bottled water with your meal – that’s extra
• There’s a coffee shop with lattes, but that’s extra too
• Photographers follow your every move, in the hopes that you’ll end up buying a few pix
• Frequent announcements encourage you to attend the “art at sea” auction or a seminar on buying diamonds, or to buy a teddy bear for your kids
• After a massage, the massage therapist will lecture you about your health and strongly recommend at least $100 of lotions and potions to save you
• Want to see the ship’s laundry room? $95 for behind-the-scenes access

As my massage therapist was trying to pitch me on their $50 version of Ben-Gay, I had a vision of the management team of this cruise line giving their quarterly earnings call to stock analysts. I imagined that – in their world – “PPC” might stand for “profit per cruiser,” and the earning call went something like this:

“We lowered our average fare price by 4%, reducing our income by $280 million. But through improved upsells and cross-sells on-ship, our average PPC increased by 12% to $450 million, making for a very successful quarter. Our plans for the next quarter are to start charging add-on fees for walking on carpeted floors and for getting your linens changed in your cabin, which we expect will further increase PPC significantly.”

Now, I’m just one customer (and an ornery one at that), so I might be an outlier, but it’s unlikely that I’ll be taking a repeat cruise with this company. And if I did decide to do so, I’d make sure to add at least 50% to the fare price when calculating the value of the vacation. So while the cruise line did an admirable job of bilking me and my family during these seven days at sea, they’ve done little to make me want to come back.

Search Campaigns & Setting Conversions On Cruise Control

Now, think about how you run your SEM campaigns. You create ad text that entices potential customers to visit your site, followed by a well-tested landing page that pushes people through your conversion funnel as quickly as possible. You work hard to get that purchase, and then you sit back and high-five your SEM compadres when you see the ROI/ROAS go up or the CPA go down.

In one sense, you are doing exactly what you are supposed to do; you’re measuring actionable metrics and delivering increased performance, and you’ll probably get a well-deserved bonus for your efforts. But what happens after that customer checks out (other than the firing of your conversion pixel on the thank-you page)? Does that customer get great customer service? Does he feel like the product he received was worth the money he spent? Does he come back to make future purchases? Does he tell his friends and family about how great your company is?

Lifetime Value Trumps Cost-Per-Acquisition

In many cases, the companies that are the best at driving ROI/ROAS are the worst at creating loyal customers and LTV, simply because the whole company is driven by that initial purchase and not the long-term customer relationship. And, in most cases that I’ve seen, even if a company does care about LTV, it’s rare that the front-line SEM team is ever measured against, much less given insight into, the LTV that they are driving.

The result is a world where companies get hooked on marketing like a drug; if customers only buy from your business once or twice, the only way to keep driving more and more sales is to spend more and more money on marketing to drive new customers into the funnel.

Creating Customer Loyalty

When you add something to a Zappos shopping cart, they’re betting it won’t be for the last time.

Of course, there are companies out there that aren’t addicted to marketing. The poster child of this type of company is Zappos.

Zappos doesn’t offer coupons, doesn’t offer the lowest prices, and doesn’t advertise on products unless they know the product is in-stock (and if they advertise a product by mistake, they buy the product for you from a competitor).

What they do focus on is offering the world’s best customer service, free shipping, an incredible return policy, and zealous focus on LTV.

The result is a multi-billion dollar company with ecstatic customers, passionate employees, and incredible growth.

Do you think the Zappos SEM team is compensated solely on ROAS? Do you think they encourage their Web development team to add lots of pop-ups and flashy banners to try to close that extra .02% of customers? Of course not, and yet here they are, the world’s biggest online shoe store.

If Zappos ran this cruise line, I can assure you that the seminars on buying beautiful tanzanite rings would be eliminated and the Diet Coke would flow freely. The price to get on the ship might be a little more expensive, but people would happily pay it and happily return year after year for more cruises.

One of my favorite books ever is Customer Loyalty by Frederick Reichheld. If you doubt that a customer-first, LTV-over-CPA model can work for your business, read this book (by the way, Zappos has it in their lobby!). Whether you run a cruise ship, a shoe store, or an e-commerce business, the days of just focusing on the initial sale and not the long-term customer relationship are ending. As some might say, that ship has sailed!

Image via Shutterstock

Over the last month, I’ve had two clients send me email pitches from other agencies trying to “poach” business away from us.

The two pitches were from different agencies, but the message was the same: something is ominously, terribly wrong with the way your current agency is managing your account!

Here’s the pitch from the first agency:

“I’ve been doing research on your AdWords account and have come across a number of problems running live. These include but are not limited to:

• Serving untargeted ads
• Serving ads on irrelevant queries
• Extremely poor page rank (not showing up on the first or second SERP)
• Not serving ads on high volume, highly relative queries
• Weak branded campaign
• Lack of free ad extensions / site links etc.

As you’re well aware, these are all cyclical in nature and are more detrimental to your accounts health the longer they run, not to mention hindering your ROI.“

And here’s a snippet from the second high-pressure sales agency:

“The bottom line, your current agency is not doing all that great of a job and it is definitely affecting performance of your account. I cannot tell you how bad those affects are without auditing your actual account.”

You’ll notice a common theme in both of these emails: allegations of vague-but-scary-sounding problems that are intended to create doubt, without any actual evidence of problems (e.g., “I cannot tell you how bad those affects are without auditing your actual account.”)

As one of my clients noted in an email to me: “Thought you might like to see how your competitors are cold calling. I like the tactic of telling us what we’re doing sucks. They must have a lot of clients with poor self-esteem.”

So how do you really know which SEM agencies are awesome and which ones aren’t? Here are some general guidelines to help you separate the wheat from the chaff.

Good SEM Agencies Sell Their Strengths

Bad Agencies Point Out Others’ Weaknesses

If an agency doesn’t start their pitch by telling you why they are great and instead tries to convince you that someone else (usually your existing agency) is bad, don’t walk away from that firm. Run. See above!

Good Agencies Have a Process for SEM Management

Bad Agencies Vary by Account Manager

Here’s a simple way to judge two agencies: ask each of them to let you talk to two or more of their account managers (AM) – in rapid succession.

Ask each AM one question: what is your process for executing SEM campaigns? If you hear the same thing from each AM, you’ve found a good agency.

If each one of them has a totally different approach and perspective, the agency is not really an agency at all; it’s just a bunch of people working in the same building on the same payroll system.

In other words, a good agency should operate like a good brand – you choose them because you expect a certain way of doing things that you expect to drive superior results.

Imagine, for example, if every McDonald’s restaurant had their own process and recipe for Big Macs – every time you went into a McDonald’s, your happiness would be at the whim of that shift’s cook!

And yet, many advertisers are OK with hiring an agency that operates in this fashion – hiring lots of smart people but not training these people in a consistent way that drives consistent results.

Good SEM Agencies are Transparent

Bad Agencies Hide Results

SEM is all about the numbers. Reputable agencies want their clients to know every relevant metric about their business and results.

This means building processes for client communication (such as using a project management tool like Basecamp), making it clear who in the agency is responsible for the client’s success, and giving full access to AdWords, analytics accounts, and any other reporting data.

Bad agencies do their best to separate clients from their data. One of the biggest warning signs that a potential agency is a bad apple is a request by the agency to ‘run your campaigns in our AdWords account.’

This usually means that a) the agency intends to share as little data as possible with you and b) if you ever want to leave the agency, you’ll have to start an entirely new account and lose all of your account history (which has a negative impact on your Quality Score and also makes it difficult to glean historical learnings).

Note: an agency request to add your account to their My Client Center (MCC) is different from a request to run your campaigns in the agency account. In the first case, the account is always under your control and is just being managed by the agency; in the second, the account is controlled by the agency.

Good SEM Agencies Keep Business Based on Results

Bad Agencies Keep Business Based on Contracts

Did I mention that SEM is a numbers game? Good agencies want you to keep using them because they are meeting or exceeding your business metrics.

From a contractual perspective, this means that the agencies are either a) compensated on a performance-based model, earning variable compensation based on the amount of profit they make your business, or b) include a very liberal “termination” or “out clause” in their contracts, enabling you to walk away from the deal if you feel the agency is under-delivering or has over-promised.

Bad agencies, as you might expect, try to force you into very long contracts with little accountability. I heard of one agency that asked clients to sign three-year contracts with no right of termination! That’s a sure sign that the agency’s incentives are not aligned with the clients’ incentives.

Good SEM Agencies Have A Sweet Spot

Bad Agencies Are All Things to All People

The adage “A jack of all trades is a master of none” is well-suited to SEM agencies. A good agency differentiates itself in two primary ways: a) by the types of marketing services they offer and b) by the size/type of client they accept.

For example, an agency that just focuses on SEM or just focuses on online direct-response marketing is going to provide you with much better SEM results than an agency that claims they can handle online, out of home, TV, and PR. Think of an agency like a doctor: if you knew you had a heart problem, would you rather see a cardiologist or general practitioner?

Similarly, good agencies focus on a particular type of client, rather than trying to service any client that comes along. For some agencies, this means focusing on a particular vertical; for others, it means focusing on a certain amount of SEM budget.

The budget range of an agency is actually a lot more important than people think and is worth discussing further. Assume you work with a company that spends $50K/month on SEM and you are considering three agencies – one that mainly has clients spending under $500/mo, another that has clients spending between $25K-$100K, and another that mainly deals with clients spending more than $1M/mo.

The $500/mo agency is used to assigning 20 clients to each AM, which means that you are unlikely to get the service your account merits. Similarly, the $1M/mo+ agency regards you as a small fish in a big pond – one that will always play second fiddle to their key accounts.

While this is certainly not the only relevant factor in considering an agency, hopefully you can see why this is a factor that should not be taken lightly!

Good Agencies Make You Feel Like Family

Bad Agencies Make You Want to Hide Your Daughter

My last point is basically about trust. A good agency tries to build partnerships with clients and tries to align incentives so that everyone wins or loses together.

An agency should be considered a friend and ally of your company. This should be apparent in the sales pitch, the kick-off and after years of working with the agency. Good agencies are built for long-term relationships instead of short-term profit.

Bad agencies make you feel dirty. They use high-pressure, deceptive sales to get you “in the door,” do their darnedest to hide results, lock you in to unfair contracts, and build adversarial relationships between account managers and marketers.

If the golden rule for life is “do unto others as you would have done unto you,” perhaps the golden rule for agencies should be “would I want to sit next to an agency’s sales rep or AM on a cross-country flight?” If you aren’t genuinely excited about this prospect, you have chosen – or are about to choose – the wrong agency!

Those are just my top tips. There are many other ways to evaluate SEM agencies that make a lot of sense (asking for references, asking to speak to your account manager before signing a contract, looking up their clients’ results in the SERPs), but for the sake of brevity, I won’t detail all of them here.

The truth is that there are a lot of awesome SEM agencies out there, but there are also an increasing number of boiler-room sales shops masquerading as legitimate SEMs that are more than willing to sacrifice your results for their bottom line. I hope this article helps you differentiate between the two!

In this case, I had just launched the client’s account and had bought a total of maybe 20 innocuous terms. To be clear, there was *absolutely* no reason for this client to be banned (the client offers free online classes, is VC-funded, and 100% legit in every way).

Here’s the initial email we got from Google notifying us that we had been blacklisted:

From: <adwords-noreply@google.com> Date: Tue, Oct 23, 2012 at 4:42 AM Subject: Your AdWords Account: Account Suspended To: [redacted]

This message was sent from a notification-only email address that does not accept incoming email. Please do not reply to this message. If you have any questions, please feel free to email us through the AdWords Help Center at  https://adwords.google.com/support/bin/request.py.

Dear AdWords Advertiser,

We periodically review accounts for security purposes and to verify billing information. As a result of this review, your account and any related accounts have been suspended, and your ads are no longer running on Google. If you believe your account was suspended in error, please contact us through the AdWords Help Center.

Sincerely, The Google AdWords Team

So I wrote my AdWords rep and asked her to fix the issue. She quickly forwarded my email to someone on the AdWords policy team in India for resolution. After about a week of radio silence, I received the following response from said policy team:

Hi David,

Thank you for reaching out to us about your account [redacted].

While reviewing your account, we found violations of our AdWords policies in this or a related account. As a result, your account has unfortunately been suspended, and your ads will no longer run on Google.

For information on the terms associated with AdWords account use, please review our Terms and Conditions at:https://adwords.google.com/select/tsandcsfinder

I quickly replied back:

Dear Adwords support, thank you for wasting our time with this meaningless email. 

[Account Manager], can you please get someone to actually help us?

About a day later, my account manager got the account back online (for which I am grateful), so I did end up with the correct resolution, but only because I actually know humans at Google who could intervene on my behalf. Had I been a normal small business, this might have been the end of the road for me. And for many small businesses, getting kicked off of AdWords could also be the end of their business.

What’s surprising about this story is not that I fell into a frustrating and endless feedback loop with an overseas customer service team, but that it was Google at the other end of the email acting with such incompetence.

Sure, we expect to get horrible customer service from the phone company, the cable company, and most US airlines, but Google is arguably the smartest company in the world. Dumb people simply don’t get hired at Google, and Google is famous for coming up with smart solutions to even the most inane problems.

So, one would think that something as critical as the decision to kick a paying customer off of the Google AdWords system would have a much smarter solution that a continuous cycle of anonymous, vague, and unhelpful emails.

The Two Likely Reasons AdWords Policy Responses Suck

The sheer volume of policy emails (and general customer service requests) Google must get is certainly one reason that Google’s policy emails are so vacuous. Indeed, one Google employee estimated that spending just ten minutes on every customer service request would require Google “to hire 20,833 people to work 8 hours a day, just to keep up.”

Granted, this estimate was applied to all customer service requests, of which AdWords policy issues is just a sliver; but, given the millions of AdWords advertisers around the world, the number of policy-related customer service emails Google gets is likely to be quite massive.

Another reason Google’s policy emails are so banal and useless is likely due to potential legal liability. I’m not a lawyer (nor do I play one on TV), but I can imagine several scenarios in which Google could be threatened by lawsuits as a result of their AdWords policies.

For example, if an AdWords policy rep admitted to an AdWords client that his account had been mistakenly suspended, the customer might try to sue Google for lost revenue while the account was offline. Or perhaps, if an AdWords rep told a customer to do certain things to get an account reinstated (e.g., change your website), and the customer followed this advice and then was still rejected by the policy team, the customer might sue Google for the cost of the changes made to the site.

Basically, because AdWords blacklisting has such a direct financial impact on the business getting banned, the chances of litigation are probably higher in this situation that most.

Why Google Should Get Better At Customer Service

I’d argue, however, that these serious issues are nonetheless worth overcoming. First, simply because Google is losing millions of dollars a year by erroneously banning legitimate advertisers. My limited experience with the policy team alone tells me that many upstanding Google advertisers are unfairly caught in the policy dragnet every year.

Second, because bad customer service directly drives down profit! An interview with Harley Manning from Forrester recently illuminated this point:

A study conducted by Watermark Consulting using the data in Forrester’s Customer Experience Index showed that a portfolio of customer-experience leaders returned 22.5%. During that same time period, the S&P 500 returned -1.3%, and a portfolio of customer-experience laggards returned -46.3%.

This relationship between customer experience quality and market returns holds true except in industries that have “trapped” customers due to lack of competition. For example, a cable company that operates entirely or mostly in areas where they own the only cable franchise, or health insurance providers, who sell to benefits managers at companies and are therefore insulated from the wrath of their end customers (consumers).

For those of you who think AdWords customers are “trapped” customers, trust me, they are not! Facebook, Twitter, Yahoo, MSN, and eBay are all building alternatives to AdWords that are allowing advertisers to diversify their online marketing portfolio (I refer to this as the “wide tail” of marketing). Bad customer service (and the fear of being banned without cause) will only accelerate the flight to AdWords alternatives.

Last but not least, it’s just the right thing to do. The American criminal law system is built on Blackstone’s formulation, better known as “it’s better for nine guilty men to go free than to have one innocent man go to jail.”

The Google system appears to be just the opposite – it’s better for nine innocent men to get to jail than to have one guilty man go free. That’s just ethically wrong (and, no, I am not going to invoke the “Do No Evil” argument, so just forget that you ever read the last part of this sentence).

How Google Can Get Better

I love solving problems with “conditional logic,” and this seems to be a perfect use of that methodology. Conditional logic is basically “choose your own adventure” decision-making, where the answer to one question begets different questions down the road until the answer is reached.

Google’s current policy team conditional logic appears to look something like this:

• Was advertiser flagged by policy team for T&C violation?
  • If yes: send email telling advertiser they are banned
    • Is this a first-time violation?
      • If yes, send email telling advertiser they are banned
        • Is this a correctable violation?
          • If yes, send email telling advertiser they are banned

Real conditional logic creates a decision tree that would hopefully get real results for advertisers. With that in mind, here’s a suggested conditional logic path that the AdWords policy team is free to use (you can thank me later):

As I’ve noted before, there are tons of very smart people at Google, so I’m sure that there are a lot of people over there that could come up with a better conditional logic chart than the one above! But, let’s face it, the current system wastes everyone’s time, is unfair to innocent advertisers, and hurts Google’s revenue and brand – there simply has to be a better solution out there.

If I wanted to, I could create a targeted campaign that only shows ads to people:

• In San Mateo, CA
• Using their iPhone
• Using WiFi
• On AT&T
• Online between 7:00 and 7:15PM
• Who have previously visited a specific page of my website
• Who typed in the query “Dracula costume”

With all that data, I could create ad text and landing pages that might make someone wonder if I’ve hacked into their device and stolen some of their personal files from their house.

But wait – there’s more! I could also develop a remarketing campaign on Google Display Network to follow this poor consumer around the Web with increasingly more aggressive ads offering big discounts to come into my costume store (with remarketing, you can target not just on the page someone visited, but by how long it has been since they visited your site).

And, let’s not forget Facebook. Through the Facebook Ad Exchange (FBX), I can retarget my prey on Facebook, as well. And, if this individual has ever signed up for my email newsletter, I can also target him/her on Facebook through Custom Audiences, which is basically a mail merge between my email database and Facebook’s user list.

Finally, just to add a little more fuel to the fire, to increase my e-commerce sales, I might partner with a dynamic retargeting company like TellApart or Criteo to run display ads that show the customer images of the actual product he’s viewed on my site.

A couple of years ago, AdAge ran a column about retargeting titled The Pants That Stalked Me on the Web. The article was specifically about the author getting served Criteo retargeting ads one too many times. Today, that author might feel relieved if all he was seeing was Criteo ads.

Add up FBX, Custom Audiences, search retargeting, and the general advances in AdWords targeting, and today’s user can be (and probably often is) over-targeted to the point of annoyance.

The Road To Creepiness Is Paved With Good Intentions

Ironically, most marketers set up these targeting campaigns because they actually want to provide a better user experience for customers.

After all, serving ads to users only after you’ve determined interest in your business or a specific product is – on its face – better than just plastering the Internet with ads and hoping than one out of a thousand ends up reaching the right person.

Target ads – in theory – should also drive higher ROI for advertisers. As SEMs know, the return on ad spend (ROAS) is always higher from a search ad (which is fulfilling demand) than a generic display ad (which is creating demand). By adding increased targeting to ad campaigns, you can shift budget from demand fulfillment to demand creation, an ROAS win!

These benefits, however, can disappear quickly in an over-targeting situation. As noted, consumers who feel that you are stalking them can develop negative brand affinity toward your business.

Instead of driving tons of incremental sales from a good customer, you drive that customer away for life (and perhaps turn that customer into a “net detractor” who spreads ill will about your business across the Internet).

From a tracking perspective, too many targeting campaigns make it almost impossible to truly determine who gets the credit for a sale. Given the fact that tracking cookies from different companies don’t talk to each other, you could quickly end up in a situation where five different providers all believe that they deserve 100% of the credit for a purchase.

If you happened to pay all five of these providers for the sale, you might suddenly find that ad programs that seemed like no-brainers from a ROAS-perspective collectively add up to a negative ROAS result!

Stop Stalking, Start Sculpting!

To go from over-targeting to fine-tuned targeting is a bit of an arduous journey, but one that is ultimately worth the investment. To do it right, I recommend these four steps:

1. Set up attribution tracking.

Attribution may be the official word-of-the-year in online marketing for 2012. Attribution simply means giving proportional credit to a sale to the many clicks and channels that contributed to your customer’s buying decision. So, instead of just last-click tracking, an attribution model gives credit to all clicks.

Attribution tracking fixes the problem of five partners each giving themselves 100% credit for a sale. The downside of attribution is the cost; the leading attribution players (Adometry, C3, ClearSaleing, Convertro, and VisualIQ) typically charge anywhere from $3-$10K/month to use their services. Ouch!

2.  Set frequency caps – across all channels, if possible

Once you’ve gotten attribution set up, you can start to see how different channels interact with each other globally. For example, perhaps a successful search on the term [Dracula costume] is almost always preceded by at least three views of a display ad, but users who first click on search and then go to Facebook and click on an ad almost never convert.

You can use this information to set frequency caps (the number of times a user sees your ad on a given channel) and: a) avoid spending money on clicks or impressions that won’t convert; and b) reduce the chances that you are just annoying your users!

This also requires some heavy lifting – for example, segmenting pools of users based on where they are in the conversion funnel and then setting different frequency caps across different channels accordingly – but you should have a positive payoff if properly executed.

3.  Create different targeting messages at each stage

Now that you know which channels deserve credit and how frequently you should blast your message to your potential customer, you can set up different ad creative to reflect the different stages of the user journey.

For example, if you know that people seeing a display retargeting ad are at a much earlier stage than someone you are targeting via AdWords mobile search ads, your display ad should be much more focused on awareness and your mobile ad highly focused on conversion.

4.  Balance ROAS with Customer Satisfaction

Last, but not least, step out of your aggressive direct-marketer shoes for a moment and think about the lifetime value of a positive relationship with a customer. Sure, you could set a frequency cap of 8X for a segment of your audience and gain an incremental .0002% of profit over a frequency cap of 4X, but you might also alienate some potential customers along the way.

These potential customers might never visit your business again and might complain to their friends about your devious marketing. Successful businesses today weigh profit with customer satisfaction.

Trick Or Treat?

Granular targeting and retargeting across search, social, and display will play a major role in online marketing budgets in the coming years. The diversity and complexity of this tracking, however, will cause many marketers’ heads to explode and will create confusing metrics that will trick marketers into making the wrong decisions.

The proper tracking, planning, creative, and attitude can enable you to avoid these problems. Start getting your ducks in a row today, and you can treat your customers to great marketing campaigns while simultaneously boosting your marketing-driven profit dollars!

Image used under license, courtesy of Shutterstock.com.

Impossible, you say, Google’s Quality Score would crush this hapless mortgage advertiser in just a few impressions, right? Maybe in 2011, but maybe not in 2012.

The reason: a new AdWords feature called AdWords Remarketing Lists for Search Ads (sometime  called RFSA). RFSA allows you to remarket to your site visitors – on Google Search Results.

So, if someone had just visited your mortgage website but not converted, you could conceivably re-market to this very user when he/she searched for [fuzzy bunny slippers] on Google.

The Significance Of Cookie Segmentation In Search Results

To be clear, the [fuzzy bunny slippers] analogy is a dramatic (but probably not very realistic) example. A better example would be an advertiser cookie-ing a user who visits a California Super Jumbo Refinance page on the advertiser’s site, and then serving an ad that emphasizes California super jumbo refinance rates when that same user types in [home loan] a few days later.

The advertiser might also elect to bid more for this particular user – pushing its ad to the top of the user’s personalized AdWords results – but not bid at all (or bid to a lower position) for any other user.

This is a profound change in the landscape of AdWords search advertising. If you think about Google AdWords today, you essentially have four ways to segment your traffic:

1. Query-level segmentation (this would include the keywords you buy and the match type you choose)
2. Geographic segmentation
3. Day-parting segmentation (time of day and day of week)
4. Device segmentation (desktop, tablet, and mobile phone)

RFSA represents the first time that Google is allowing advertisers to implement cookie-segmentation, that is, user-specific segmentation. The possibilities for this type of segmentation are endless. For example, you could:

• Exclude users who have already converted on your site from seeing your ad in their search results (and prevent navigational clicks to your site)
• Bucket users based on the page of your site they have visited (or time spent on site, etc.), and then boost bids on high-potential users and decrease or eliminate bids on low-potential users
• Create user-specific messaging in ad text that is based on user behavior on your site, instead of just the inferred intent from the query the user searched
• Bid on queries you would have previously avoided, but only for retargeting purposes (e.g., very high-volume keywords like [mortgage] or perhaps even [fuzzy bunny slippers] in an extreme case)
• Remarket or upsell new products to users who have already converted on another product

Haven’t We Seen This Movie Before?

As an advertiser, your initial reaction may range from glee (Yay! Better targeting on AdWords) to horror (Boo! More levers I have to try to manage in AdWords). My prediction for the ultimate impact of cookie-based segmentation in search results is that it will have a similar impact to the introduction of remarketing on the Google Display Network (GDN).

Remarketing on GDN has had several consequences for advertisers:

1. CPCs have increased. Remarketing increases the number of advertisers vying for a particular placement, thus increasing prices
2. Complexity has increased. Segmenting different users with different remarketing messages (and bids) takes a lot of effort Things have gotten a little easier since Google launched its new AdRoll-esque “smart” remarketing tag, but for advertisers with lots of products or services, remarketing segmentation is almost a full-time job(!)
3. It’s become a zero-sum game. Remarketing enables big spenders to generate millions of incremental impressions without hunting down every last placement on GDN. This encroachment of the big spenders only serves to push out smaller – perhaps more SEM-savvy – brands who were winning the long tail game on GDN. Remarketing helps kill the long tail on GDN

It stands to reason that RFSA on AdWords will have a similar impact: big advertisers with big budgets and big marketing teams will be able to a) spend more, b) get more clicks, c) create better targeting and d) generally push smaller advertisers out of more and more auctions.

While it is sad to see opportunities for small businesses on AdWords slowly disappear, it’s hard to fault Google for creating innovation that ultimately creates more relevant ad results.

The Moral Of The Story: Get To Know Your Cookies

Despite fears that regulators may launch a war on cookies (as in Europe, where legislation requires advertisers to potentially ask consumers for permission prior to installing a cookie), the trend – at least in the U.S. – seems to be moving toward an online advertising world where the cookie is truly king.

My agency focuses on search, social, and display, and in the last six months alone, each of these marketing channels has seen product releases that place a huge importance on cookies. These include:

• RFSA
• Google’s new smart remarketing tag
• Facebook’s FBX – which allows advertisers to retarget users within Facebook results

To be clear, this stuff is no longer just retargeting 101, the “this person didn’t convert so I’ll just follow them around the Internet until they do” type of marketing. Rather, this is highly nuanced segmentation of both potential and existing customers. It’s about modeling behavior and serving up ads with the right message, right offer, right timing and right bid based on personal behavioral data.

If you thought AdWords was complicated before with only query, geo, day, and device targeting, you ain’t seen nothin’ yet – cookie-based retargeting might just blow your mind. If this sort of segmentation takes off – and I think it will – all SEMs will have to start paying attention to cookies, and fast!

One of the seminal moments in George Orwell’s 1984 occurs when the hero – Winston Smith – is finally convinced by his torturers that 2+2=5.

The point of the scene is to show how Oceania (the totalitarian regime in which 1984 is based) has so much control over the mind of its citizens that it can even convince them to reject the fundamental rules of mathematics!

Another of my favorite moments from 1984 occurs when the ironically named “Ministry of Truth” retroactively changes an old newspaper article regarding chocolate rations so that a new change in rations looks like an increase rather than a decrease.

Again, the state’s control is so absolute that history can be changed as needed to reflect whatever current realities the state wants to project.

Introducing Google-Think

What, you might ask, does this have to do with SEM? I’d argue that many (perhaps most) SEMs are disproportionately influenced by data, tools, and research provided to them by Google. This influence allows Google (like Oceania) to change SEMs’ priorities, budget allocation, and yes, even math!

Don’t believe me? I’ve created a quick survey for you, the reader, to assess the level of influence Google exerts over you. Here goes:

1. Do you use Google Analytics as your primary analytics platform?
2. Do you rely on Google AdWords conversion tracking as your primary measurement of success on AdWords?
3. Do you have a dedicated Google AdWords account representative?
4. Do you subscribe to, or regularly read, the Google AdWords blog?
5. Are you a certified Google AdWords professional?
6. Do you give at least partial credit to view-through conversions?
7. If you answered yes to #6, did you begin giving credit to view-through conversions after September, 2009?
8. Do you use DoubleClick Search for your SEM campaign management platform?
9. Are all of your display campaigns on the Google Display Network (no 3^rd parties or DSPs used)?
10. Did you launch your first mobile advertising campaigns in 2009 or later?

Add up all your answers and give yourself one point for all “yes” answers and zero points for “no” answers. Out of 10 possible points, here’s my analysis of your score (full disclosure: my personal score on the quiz is seven):

• 7-10 points: You are living in an Orwellian Google world. Google controls how you think about online marketing and can influence the metrics you use and your budget allocation.
• 4-6 points: Your marketing decisions are influenced by Google, but you retain some independent thinking skills.
• 0-3 points: You are a renegade who is trying to subvert the dominant paradigm. You use Google like a rented mule and make decisions without any regard to Google’s viewpoint (beware, the thought police are after you!).

I’m sure that this assessment is going to enrage many readers, particularly those of you who scored seven or higher (I can’t imagine many people like being accused of blind obedience).

But consider the significance of the following facts:

• Google Analytics is constantly updated to emphasize metrics that favor Google business units. Two examples: the woeful lack of social media metrics (other than Google Plus, of course. It is technically complex to set up proper Facebook tracking), and the inclusion of attribution metrics only after the DoubleClick acquisition. Like it or not, Analytics is a lens that places undo focus on Google’s products, at the expense of other channels where Google lacks dominance.
• The AdWords pixel gives 100% credit to AdWords conversions, meaning that you are likely over-valuing clicks on AdWords.
• Google Account reps are very effective at educating clients on initiatives important to Google – such as video advertising after the YouTube acquisition, or mobile advertising post-AdMob acquisition.
• The AdWords blog also emphasizes the marketing products and measurements Google is promoting.
• Being a Google Certified professional means you have completed the AdWords professional exam, which includes at least 20 questions that are nothing more than marketing pitches by Google (things like “If you want to reach customers considering a car purchase, the most targeted place to advertise would be a) the sports section of a newspaper; b) a billboard; c) a Google Display Network ad on a car review Website.” Note: I made this question up, but you get the point).
• If you give credit to view-through conversions, especially post-DoubleClick acquisition, you were probably influenced by Google’s marketing to do so.
• DoubleClick Search, like Google Analytics, allows Google to create user flows that emphasize certain metrics over others, to Google’s advantage.
• Google’s AdMob and DoubleClick acquisitions have integrated into AdWords, making it easy for advertisers to run display and mobile campaigns inside the AdWords interface. But there are dozens of other networks and services that offer advertisers display and mobile options outside of Google. Advertisers who restrict their display/mobile campaigns to AdWords are likely missing out on potentially lower-cost, more effective opportunities.

For the record, it is perfectly within Google’s rights to try to influence the marketing budgets of online marketers! And in fact, the way in which they are exerting influence is laudable – through free tools and great resources that provide marketers with reams of data and help. (Recall that prior to Google Analytics, most advertisers had little choice but to pay thousands of dollars a month for analytics software, for example.)

I also give Google a ton of credit for introducing SEMs to the world of mobile, display, and video advertising (though just imagine if Google acquired Facebook – you can be sure that a barrage of Analytics improvements, AdWords blogs, and white papers would make certain that marketers suddenly and dramatically increased their spend on and attribution of social media).

I’ve directly changed the way I think about direct marketing (to include top-of-funnel channels) thanks to the recommendations and feedback from my AdWords representatives.

The challenge for marketers is to separate the genuinely valuable Google tools and advice from selectively self-interested ones. Milton Friedman famously remarked “there’s no such thing as a free lunch,” and so it goes with Google. In exchange for a price tag of zero for most Google advertising products (prediction: Doubleclick Search will someday be free to use), users are unduly influenced by online advertising’s 800-pound gorilla.

Indeed, a campaign in AdWords today might show two keywords, each with two conversions, and one with an additional view-through conversion as well. Three years ago, that view-through conversion would not have been counted.

Put another way, 2+2 can now equal five in AdWords (see, Google can change the rules of math)! Has your chocolate ration increased or not? If you aren’t cross-checking your data and strategy against Google’s recommendations, you might not know the answer!

Overcoming Google-Think

Now, wait a second…

As with all forms of dependency, the first step to overcoming your addiction to Google Think is (say it with me) admitting that you have a problem.

In other words, recognize the level of influence Google has on your marketing thinking, and make sure to apply a healthy dose of skepticism going forward. Again, a lot of Google’s recommendations are awesome, just not all of them.

Next, actively seek out alternative viewpoints outside of the Googleplex. There’s plenty of bloggers who offer worldviews that are radically different than the official Google party line. A few that will definitely make you think include Scott Cleland’s Precursor Blog and Harvard Professor Ben Edelman’s website on advertising fraud and ethics. These types of blogs aren’t inherently any less biased than Google’s blogs, but they offer a valuable alternative perspective.

Finally, force yourself to (at least occasionally) test new partners beyond Google. Happy with retargeting (er, remarketing) on Google? Test companies like AdRoll and Retargeter and see if their solutions outperform Google’s.

Love Google Analytics? Try out alternatives like KISS Metrics, Omniture, or WebTrends. Seeing awesome results on Google mobile ads? Explore other mobile platforms like Millennial Media, JumpTap, or TapJoy. And let’s not forget Yahoo/Bing – there’s good traffic in them hills, often at a discount to what you’d pay on AdWords.

Google is a great company that facilitates millions of jobs and billions of dollars of economic activity every year (and guess what: they’ve got free data on that too – they claim $80 billion of US economic activity was attributable to Google in 2011!).

But like any big company, Google has revenue targets to hit, and one way to drive revenue is to convince marketers to spend more and more on Google products. So reap the benefits of being a Google partner, but try not to drink too much Google Kool-Aid along the way!