I believe that categorizing keywords into the finest groupings that make semantic sense is the right way to do it; often I’ll have a category with 2, 10, or perhaps 30 keywords at the most. Later, when some of the categories are turned into actual campaigns, this tight organization and relevance will tend to pay off with higher quality scores.

Since Google Adwords takes into account the relevance of keywords to the creative, obviously grouping very diverse keywords will result in low relevance, so this is why relatively fine categorization is important.

Often, however, I find myself with too many keywords to handle; even as little as 5,000 keywords broken down into 300 categories, for instance, is still not a very manageable set.

In these cases, I like to take the keyword categories and bundle the categories themselves into a *secondary* category that represents the “funnel” stage that the keyword category belongs to.

Marketers are told to think of a customer as being in one of various “funnel” stages at any given time, and even if you’re not systematic about it, you probably already think of brand terms as being “lower funnel” and research-type terms as being “upper funnel”.

Most readers are doubtless familiar with models such as “Attention-Interest-Desire-Action”, and other 4, 5, and 6 stage funnels which are pretty standard fare for marketers.

After performing my initial keyword categorization (sort of into micro-categories), I like to categorize the categories themselves into a total of *ten* funnel stages I’ve developed, which are organized around a “problem/solution” mental model.

In Figure 1, I’ve shown individual keywords belonging to each funnel stage for a variety of B-to-C funnels. Later, Figure 2 presents some B-to-B  examples.

These keywords presented could be actual keywords, but I think they are more appropriately thought of as representing *categories* of keywords:

Figure 1 - Business to Consumer Search Funnel Stages

Ten stages may seem like a lot of detail, but organizing keyword categories into these stages:

1. Forces you to really try to understand searcher’s intent.
2. Gives you a sense of where the holes in your keyword research are from a funnel perspective.
3. Resonates with clients or management and is a great way to discuss and understand a business.

For example, after going through this exercise with one client, to my great surprise, they told me that stage 2 (“Suspicion There May Be a Problem“) was almost the sole focus of their existing marketing.

Their strategy is to pull in searchers looking for help identifying their problem, establishing them early as a trusted brand in the eyes of the searcher.  This client has found that organic and offline conversions then naturally follow. Although very much a one-trick pony approach which I would not recommend for most businesses, it works great in their market.

Below is another version of the funnel with examples that are more B-to-B oriented, for those interested in that perspective;  we’ll now run through the funnel stages, explain the thinking behind each of them, and discuss which stages you should consider addressing in your marketing mix.

Figure 2 - Business to Business Search Funnel Stages

Activity Funnel Relates To

This is a very general field of activity, and will often not be a focus of marketing efforts since the customer may not actually be experiencing a problem yet.

However, display advertising that targets field-focused websites or is demographically targeted may be a useful vehicle from a branding perspective in this stage.

Suspicion That There May Be A Problem

This funnel is focused around the mental model of problem-solving; other mental models may make for useful funnels as well, but I’ve found “problems” to be universally applicable.

In this stage, there may be symptoms described but the customer does not understand the nature of the problem, or perhaps they don’t even understand that the symptoms are a problem at all.

It’s a critical stage where you can have great influence on the direction a potential customer will take; we’ll touch on this more later.

Problem Identified

This is an interesting bucket because you may have some latent versus blatant needs that you can separate out; different types of problems may actually fork off into different funnels.

Looking For Solution Alternatives

In this stage, the prospect is trying to understand the variety of approaches available to them. There are many ways to lose weight for instance; diet, exercise, portions, surgery, and so on.

This is fairly early in the research phase and can be ripe fruit for thought leadership content (great for the SEO channel as well). If you’re really lucky and you’re the only solution to a problem (perhaps you’re in a new market) then this stage may barely even exist and prospects may jump directly from stage 3 to stage 5.

Solution Space Has Been Chosen

In this stage, the prospect has decided on a particular approach for solving the problem (for instance, “dieting” to solve a weight problem).

Complicating Issues

This stage perhaps belongs alongside the funnel, but I usually place it in the middle of the research phase. Many people with problems have complicating issues; diabetes (if they are interested in weight loss), a wheelchair-bound spouse (if they are interested in travel), and so on.

Addressing these complicating issues can be a great way of differentiating your product or service and reducing friction for a final sale.

Researching A Specific Solution

Now the prospect is getting *very* specific about a particular member of the solution space (“Low-Carb Diets” in the case of a Weight Loss/Dieting funnel for instance).

Researching A Specific Brand

At this stage, the prospect is getting very serious and is educating themselves about specific providers.

Remember, brand terms are well known in the industry to convert at a higher rate as generic terms (twice the rate on average in my experience), so addressing this funnel stage should be a critical component of any online marketing effort.

Conversion Imminent

Terms that include phrases like “coupon code”, “pricing”, “cheap”, are akin to flashing red lights with a siren screaming “transaction about to occur!!!”

Spending a lot of time building out variations in this funnel section is usually well rewarded. Google Suggest is a great place to find ways that potential customers are raising their hands in these ways.

Post Conversion

Often, a neglected funnel stage, this is where you will find customers searching for things like “repairs”, “replacement parts”, “add-ons”, “upgrades”, “warranties”, and “support”.

You may or may not have offerings that address concerns in this funnel stage, but it’s important to think about them.

If you’re a travel company, trip insurance may not be something your customers will actively seek out often, and paid search campaigns targeting that concept may not be worthwhile.

If, however, your paid search keyword research turns up the concept, and you then prompt your company to put together some sort of revenue-sharing deal with a trip insurance provider to integrate their product into your cart, I would say the time spent researching funnel stage #10 was well worth it.

Which Stages Should You Target?

As most articles you’ve read on this topic probably state, you should target all of them. This is not very helpful advice though – often in marketing we have to prioritize our efforts.

If I absolutely had to prioritize the top ones to focus on initially, I would say #9, #8, #5, and #2 in that order.

Funnel Stages #8 and #9, “RESEARCHING A SPECIFIC BRAND” and “CONVERSION IMMINENT” are self-evidently critical; how are you going to leverage this great funnel if you don’t catch potential customer at the end of it?

I am, however, a big believer in avoiding cannibalization from organic search conversions, so my preference is to consider targeting competitor brand terms  before I would work on cannibalizing my own.

Funnel Stage #5, “SOLUTION SPACE HAS BEEN CHOSEN” is square in the middle of the research phase, and catches customers who are partially educated on the problem and are still early enough in the funnel to nudge in your direction.

Funnel Stage #2, “SUSPICION THERE MAY BE A PROBLEM” is important because it’s an opportunity for you to disturb the prospect’s equilibrium, a critical step in any sales process.

Much like Don Draper stated in his famous “Carousel” pitch about the term “new”, with problem defining keywords, you “create an itch, and simply put your product in there as a sort of ‘calamine lotion’”. Funnel step #2 is essentially the “itch” stage.

This stage, where the potential customer suspects but does not yet fully understand that they may have a problem, is a powerful leverage point for influencing searchers in your direction. Think of searchers as meteors, heading for earth – a slight nudge much earlier in their trajectory can have as much influence as a strong shove later in the funnel.

Conclusion

Very fine categorization of keywords can be helpful in ascertaining customer intent, organizing your efforts, and suggesting actual paid search campaigns you might run.

I have found these ten funnel stages in particular are a convenient and useful way for me to organize very large numbers of refined categories of keywords, derive insights from them, and create campaigns targeting various phases of the sales funnel.

If anyone has any other useful mental models for constructing a funnel besides the “problem/solution” approach I’ve presented here, or any thoughts on which funnel stages to prioritize and how – by all means, comment below.

When bidding on competitor brand terms, you don’t have to worry about cannibalization of your own organic results; these are terms for which you probably weren’t going to rank anyway. If you were, that means you’re using competitor brand terms on your own pages – a risky proposition from a legal standpoint.

Yes, the FTC does have some regulatory language about mentioning competitors for the purposes of a factual comparison, but the risk of doing this poorly and opening yourself up to a lawsuit or a false advertising complaint probably outweighs pursuing strategies involving comparisons.

The Practice Is Fairly Common

As far as paid search goes, in the U.S. at least, my understanding is that it has been generally accepted in the online marketing industry for several years now that it’s OK to *bid* on competitor brand terms as longs as the competitor’s terms don’t show up *in your creatives* (i.e. the ad text itself).

Run some brand-name searches yourself and you’ll see plenty of examples where this appears to be happening.

Google AdWords has copious information on this topic, the easiest place to find them is here:

• Google’s Trademark Advertising Policies

I strongly encourage you to to read all of them.

By my reading of Google’s policies, it seems that in the U.S. at least, if you bid on competitor brand terms, Google’s policy is not to investigate complaints, as long as you don’t include any trademarked terms in your creatives.

It’s important to note that Google’s policies (and local law) vary by country. Of course, Google’s policies are one thing; they don’t prevent a competitor from suing you however, so proceed at your own risk.

Disclaimer: I’m no lawyer, so you should get your own legal advice and research these issues to your own satisfaction before proceeding with any of the ideas in this article. Also, if you’re going to use competitor brand terms on other platforms such as Bing/Yahoo or elsewhere, you should fully investigate their policies first as well.

Caution: This Is Still Somewhat Up In The Air

Notably, a case involving Rosetta Stone was recently revived on appeal, so the overall question of the legality of bidding on competitor trademarks is still somewhat fuzzy.

If the courts lead to a reversal on this, then it could create a huge, painful mess for the industry and spawn numerous lawsuits, given the prevalence of the practice in the last few years. SearchEngineLand’s Pamela Parker has been doing a great job covering this:

• Question of Whether It’s Legal To Use Trademarks As Keywords Revived On Appeal

What is a Trademark?

Per the U.S. Patent and Trademark Office (USPTO for short) , a trademark is:

” a word, phrase, symbol or design, or a combination thereof, that identifies and distinguishes the source of the goods of one party from those of others….you can establish rights in a mark based on use of the mark in commerce, without a registration….Common law rights arise from actual use of a mark…”

• See: USPTO Trademark FAQs

Just because a competitor has not registered a phrase as a trademark with the U.S. Government doesn’t mean the phrase isn’t their trademark; it still might be considered an unregistered trademark.

Something to look for is whether they use the “TM” mark in association with something rather than the “Registered Trademark” symbol (the circle with an R).

If they are not putting “TM” (or “SM” for a “Service Mark”), then they aren’t doing a very good job of protecting their rights in that mark, an important fact to note if there is ever any court case around it (most marketing organizations are adamant about using “R”, “TM”, and “SM” the first time a trademark is used on any piece of collateral for this reason).

The bottom line is that if you register a trademark, it’s much easier to prove that you have rights in it. Google, for instance, has  a process you can follow if someone is using your trademark in their creatives, and if you can send evidence that your trademark is a registered one, that will go a long way to resolving a dispute in your favor. (Twitter famously uses trademark registrations as a factor in resolving situations of Twitter-squatting as well.)

If you’d like to see what a registration certificate looks like, you can do a trademark search yourself (per my instructions in the next section), then go to an individual record and click on the “TDR” button at the top, then see if you can find the “Registration Certificate”.

It should look something like the one below (full disclosure: I added the color version of the Google logo since the USPTO’s scanned black and white version was choppy and frankly, ugly.) Marks are generally submitted in black and white – this particular certificate looks like a re-registration that was issued about a week ago for the term [google].  I would not be surprised if there is another record in there somewhere in the system for the full color logo version however:

Figure 1: Google's Trademark Registration Certificate

How To Do Your Own Trademark Searches

If you’d like to see whether a competitor has registered a trademark, you can do some searching yourself. It’s important to note that the USPTO allows trademarks to be obtained for different classes of goods and services.

For instance, Hershey Ice Cream can have a trademark on the use of the word “Hershey” in association with ice cream, while Hershey (the large one you’re probably more familiar with) can have a trademark on use of the word in association with chocolate:

1. Go to http://www.uspto.gov/
2. Select “Trademarks->Trademark Search”
3. Select “Basic Word Search” (a “Word Mark” is just a phrase; a “Design Mark” is a stylized phrase or picture-based logo. If someone trademarks a word in a particular logo style but doesn’t register it as a Word Mark, then they possibly open themselves up to would-be infringers that just use a different logo style).
4. Search on the term.
5. “Live” means a trademark, or its application, is “Live”; “Dead” means either the application has expired or the trademark has expired.

Try it yourself for “iphone”; I just did and the search resulted in 37 records, some live and some dead.  The second-oldest is the Cisco-owned trademark that Steve Jobs famously convinced Cisco to license to Apple (see figure 2):

Figure 2: iPhone Trademark Record at the USPTO

4 Different Types Of Competitor Terms To Consider

Now that you have some sense of what terms your competitor has bothered to trademark and which they haven’t, there are a wide variety of terms worth exploring from a keyword research standpoint:

1.  The competitor’s company name

This is pretty much a no-brainer, many end-users typing company names are either deep into the research phase of the buying funnel; when they start investigating individual vendors, they are pretty close to converting.

2.  The competitor’s product names

Also a no-brainer, you probably already thought of this one.

3.  The competitor’s website name and variations thereof

Don’t forget that many people use browser toolbars to perform searches, and rather than typing Web addresses into the address bar, the often type them into the search bar (many people confuse the two). So you’ll find that your competitor’s website actually shows up as a keyword.

Variations worth considering include:

• foo.com
• www.foo.com
• http://www.foo.com
• http;//www.foo.com/

4.  The competitor’s model numbers, SKU numbers, or replacement part numbers

This is a very neat trick; if a potential customer is typing a SKU or Model number, it’s likely that they are even further along in the purchasing funnel than if they typed the generic brand name of the competitor. They have likely already done all their research, know exactly what they want, and they are about to convert.

An easy way to find lists of competitor SKUs (let’s say your competitor is “foo”) is to perform the following searches; if it’s a BtoB industry, distributors and resellers often put pricing lists up on their websites, and often large Government deals require publication of pricing from vendors:

• [foo price list]
• [foo pricing]
• [foo prices filetype:xls]

Don’t forget discontinued products. If you can find any old pricing lists and diff them against newer ones, any discontinued product names or numbers can be a treasure trove (and may even deserve their own creatives). B-to-B customers especially will search for old product numbers to identify a replacement product when it wears out.

ISBN numbers, UPC codes, or industry-specific product codes might be worth some research as well, if applicable.

Do Model Numbers, SKUs & Part Numbers Constitute A Trademark?

The answer is: perhaps, but in many situations, probably not. I couldn’t find much on the USPTO’s website on this, but I found a few interesting articles detailing some court cases and aspects of this question by one law firm and one legal services firm, it seems that it largely depends on how the number is used:

• Selling Letters and Numbers: A Court Stops a Company from Claiming Rights in Part Numbers And Why Businesses Should Care
• Trademark Examples: Slogans/Model Numbers/Taglines

One particular aspect I have a problem with on this is, it’s hard for me to see how someone can put “TM” in reference to a SKU in every document in which it’s used, since the whole idea is that a SKU number is a number that resellers, distributors, etc. can look up in a database and display.

So  it seems to me that it would be impracticable to show that you tried to protect your rights in a SKU or Part number when it’s all over the Web everywhere without “TM” on it.

However, if a number is used as a sort of a brand name that consumers would recognize, it appears that you actually *can* trademark it.

Here are two interesting examples:

Dale Earnhardt, Inc.,  has trademarked the number “1″ for a pretty wide variety of products including license plate holders, which seems pretty ridiculous if you think about it (aren’t something like 30-50 million drivers in the U.S. infringing this trademark every day?):

• Dale Earnhardt, Inc.”s Trademark for the Number 1

Levi-Strauss has a registered trademark for “501″ (which actually makes a lot of sense, since it really does function as a very recognizable trademark/brand name for their line of blue jeans):

• Levi Strauss’s Trademark for the Number 501

Check Keywords For Alternate Meanings Before Using

I would recommend using phrase match; that way, if a part number is 2139283423, you’ll also pick up some great lower-funnel variations like [2139283423 cheap], [2139283423 price] and so on.

However, if you’re trying to attract traffic focused on a competitor’s SKU (say, a steak knife set), and one of the variations it attracts traffic on is [2139283423 battery], that might be an indication that the term means something in another industry.

For this reason, it’s  important to test all keywords out in both Google Suggest and Google Search. If all the Google suggest searches seem to be related to the product or service you want to bid on, and the search results all seem to be related to it, then you have  a good candidate.

In a real-world example, a search of “ruby tuesday” clearly brings up the restaurant, which is great if that’s who you’re targeting, but a significant number of search results, and presumably searchers, are searching for the lyrics for the Rolling Stones song title “Ruby Tuesday”. That term may not be a great one to go after (or you could perhaps manage the situation by using negatives like [lyrics] and so on).

Often if you look in Google suggest, you can see whether the Model or SKU number means something in another industry right off the bat. Try typing the number, a space, and then try every letter of the alphabet to see what comes up.

Let’s say we’re a manufacturer of smartphones and we want to bid on Samsung’s “Stratosphere” Android smartphone. One of its SKU numbers is [i405]. Figure 2 shows the result of checking that term out in both Google Suggest and Google Search:

Google's Trademark Registration Certificate (source: USPTO)

Samsung does show up as a variation, but it’s easy to tell that many people searching on that term are interested in traffic conditions on the 405 highway in Los Angeles (I don’t know whey they bother searching, current traveling time is almost always “4..Oh..5..hours” ;-)

Checking against Google suggest can be a lot of work, but Ubersuggest is one way to speed the process. Don’t neglect doing the actual searches though, often a search will show query diversity not reflected in Google Suggest.

Typically, if you have a 6 to 9 character SKU number, it’s usually long enough to be unique, but sometimes you’ll run into another manufacturer in an unrelated field that uses a similar SKU numbering system.

As always, running Search Query Reports and put appropriate negatives in place is an important best practice regardless of the type of keywords you’re targeting.

Be Careful With Your Creatives

You might think this goes without saying as it should always apply to your paid search efforts, but I think it bears pointing out.  While it’s important to exclude competitor terms from your creatives, you should also make sure that any creatives you use are neither *misleading* nor *confusing*.

You shouldn’t trick searchers into coming to your website, even inadvertently. You certainly don’t want to attract any false advertising complaints, or create any fodder that could be used against you later in any legal proceeding.

For example, I would not personally be comfortable bidding on a competitors part number, and then using the vague creative “Replacement Parts: Best Prices Here”. I think a reasonable person would expect that if they clicked on that ad, they would be likely to be able to purchase the competitors part at my website.

A creative focused instead on the customer problem that my product or service solves, or perhaps describing my own offering in some specific way, would probably be much clearer.

Besides, telling the truth and being clear are just plain good business practices anyway! So write your creatives in such a way that they accurately represent the landing page, taking into account the keyword being searched on and the searcher’s likely intent.

What Results To Expect

Brand terms, and SKU/Models, on average, should have a very high click-through rate, perhaps twice the normal average.  They should also convert at a higher rate than the typical keyword.

In the ideal world, if you were targeting 800 competitor SKU numbers, you’d have 800 campaigns, each with one keyword and one ad group, and would include the SKU or Model in the creative, for maximum relevance, highest click-through rate, highest quality score, and lowest CPC after the AdWords auction adjusts for quality score.

In reality, you should probably not use the SKU or Model in the creative, even if a competitor has not trademarked those terms. Doing so is still more risky, in my opinion, from a legal standpoint, than just using the keywords as bidding targets. You’re likely to want to organize keywords together for convenience anyway, perhaps resulting in a few campaigns, a few ad groups, and a few creatives.

However, the low quality score you may experience as a result should be more than balanced by the fact that many of these terms are very long-tail in nature.

In my experience, the AdWords Keyword Traffic Estimator won’t return estimates for many of these types of term because the numbers are so low;  as a result, they’re relatively uncompetitive and inexpensive. If you have numerous competitors and competitor SKU numbers, the volumes should add up to a substantial number.

If you have high impression volume and high positions just about everywhere on your existing keywords, that may  indicate that increasing the budget or bids on existing keywords is not going to help much – what you need are more keywords.

If you run an analysis on keywords based on the categories above, you will often find that there is additional opportunity, on the order of 10-30% of your spend, available in those keywords. So, if you compete in a fragmented industry with many players, this strategy may be a useful way to expand an account to cover some relatively high-converting long-tail terms.

What About Your Own Terms?

Surprisingly, when you do this, you’ll often notice that your competitor isn’t even bidding on their own Website Address, Model Numbers, Part Numbers, or SKU numbers.

Are you doing so with your own? Doing so may be worthwhile, but there is also an argument for cannibalizing your competitors’ organic search traffic prior to cannibalizing your own organic traffic.

Be Careful Out There!

Again, none of this constitutes legal advice, you’re on your own with what you do. If you do decide to pursue this approach, then if a competitor complains about a particular keyword or set of keywords you are advertising against, the best policy, in my opinion, would probably be to simply stop using those keywords immediately.

If a competitor is bidding on your terms, why not at least complain, even if you’re on unclear legal grounds?

The ROI of writing up a threatening letter, putting a stamp on it, and sending it,  is probably pretty high if you can get your competitor to knock some high-converting keywords out of their campaign (unless of course, you’re awakening a sleeping giant by doing so – in which case – maybe you should just live with it).

Keep Up On The Issues As They Evolve

Shameless (but appropriate) plug for SearchEngineLand: Pamela Parker has been doing a great job covering this evolving area. If you’re thinking of pursuing a strategy like this, you’d be wise to read any SearchEngineLand coverage, going forward, particularly regarding the ongoing RosettaStone appeal.

Editor Postscript: This post was updated on 5/1/2012 to include the “Be Careful With Your Creatives” section.

-    Jean de La Fontaine, 1668

It seems that every initial conversation with a prospect, or a new client, seems to start out as follows:

Me: “What are your business goals?” Client: “I want more {clicks, actions, conversions} at a lower cost”.

Well, of course, this barely even needs articulation, everyone wants those things. Actually, those “goals” are really a means to an end, not the end itself – marketing goals if you will, not business goals. These goals are universally focused on of course; the trick is in how one goes about it.

However, of all three (clicks, actions, and conversions) if your strategy is to optimize for clicks or actions, your primary goal should be to move towards the third metric: tracking conversions.

The Natural Progression Of Sophistication

There is a progression in online marketing in terms of sophistication of tracking business goals (the “ends” as opposed to the “means”), depending on what you can track and tie back to your marketing efforts.

In Paid Search or its cousin Display Advertising, the progression of “ends” and “means” usually falls along these lines:

Click to enlarge

Flying Blind

If you’re doing paid search and are optimizing keywords to a cost-per-click basis, I have news for you; the key question you should be asking is not “should I invest in a bid optimization platform so I can take my campaigns to the next level?”.

The correct question is instead: “why am I flying blind in a bunch of fog?”

Perhaps you should invest in an altimeter prior to installing a jet engine!

What Can You Reasonably Do If You’re Only Optimizing CPC?

If you’re optimizing to a CPC standpoint, then the following is all you can reasonably do from an optimization standpoint:

1. Make sure you have done thorough keyword research
2. Structure your campaigns well
3. Set your bids based on what you can afford
4. Do some creative testing, and
5. Make sure you put negatives in place that make sense to you based on your knowledge of the business and the output of your search query reports.

Ultimately, you will still have no idea which keywords are really working for you other than using your intuition and knowledge of the business.

Benefits Of Shifting To Optimize For Actions Or Conversions

By all means, spend some time on the basics, but taking your tracking to the next level should be at the top of your list.

It could be, for instance, that one keyword has a very high conversion rate and should be bid way up over your average CPC, while others that convert poorly should be bid way down because they’re really not worth that much to you. You will never know this if you don’t get proper tracking in place.

Plus, knowing which keywords are converting well will guide keyword expansion efforts, isolation of top performers into their own ad groups, and so on. There are many things you can do to take your campaigns to the next level, but all of them require actually measuring results in order to have data-driven improvements.

Tracking Is Boring & Hard, But Is The Key To Success

Tracking is: difficult, annoying, technical, easy to mess up, boring, and very uninteresting to the brain of a marketer. However, having your tracking properly set up and aligning your tracking with your business goals, is the most critical success factor for paid search campaign improvement.

I don’t have sophisticated study I can quote to you to prove this, but I have seen this over – and over  - and over – and over, so take my experience as anecdotal or “clinical” evidence (others with supporting or contrary experience, please comment).

Most Web developers and marketers are not adept at setting up tracking. If you sell products through an e-commerce platform that you’ve integrated with, ask your e-commerce platform vendor for some help on tracking – it may be as simple as paying them for a few consulting hours. If you have Web developers on staff, have them slog through all the available documentation from Google, they can probably figure it out.

Some marketers use Adwords tracking pixels, some use Google Analytics tracking pixels, some use both (one credits conversions to the last click, the other credits conversions to the first click).  There are advantages and disadvantages to both – see the following help guide for a comparison.

Whatever you do, pick at least one approach and implement it, and start tracking either actions or conversions (i.e. track and optimize *at least* on a Cost-per-Action basis).

Tracking “Actions” Instead Of “Conversions”

If you can’t track product sales, but are tracking signups, registrations, or downloads, then you’ll have to put a value on each type of action.

You might analyze your funnel for instance and determine that 3 out of 100 signups result in a conversion. Well, you could for instance, value those signups at 3/100 of the average value of a conversion. It’s not an exact science, but it’s a start.

Think of actions as being fractional conversions. In fact, if you’re selling products on an e-commerce basis but also have signups occurring, you can track both actual conversions and fractional conversions for the other types of actions.

This way, you can ensure that you’re giving some attention to keywords earlier in your sales funnel, rather than spending only on final converters.

Taking Your Game To The Next Level

If you can, try to track actual dollar amounts of sales being driven by each keyword; then you can optimize your paid search keywords to a Return on Ad Spend (ROAS) goal.

If you can break out the dollar amounts of each sale by product, then you can actually tie it back to net margin dollars earned and understand that certain keywords drive more net margin than others.

This may be challenging, in that you have to get tweak your e-commerce cart solution to pass the sale amount as part of the tracking, but the effort is well worth it.

The Ultimate In Sophistication

Don’t forget that the advertiser with the highest lifetime value per customer ultimately sets the CPCs in the auction.

If one advertiser is shooting for a one-product sale, while another is taking into account that they are acquiring customers who will later buy associated products, or will make in-app purchases, or will renew a subscription again in another 12 months with a certain probability, the advertiser taking more into account will typically be able to “afford” a keyword more than the less sophisticated one.

Are your competitors involved in a subscription-based business, where your business model is a one-time sale? Are your competitors selling higher-ASP or luxury products, where your products are lower end?

If all of your competitors are using Paid Search advertising, and the keywords are just “too expensive” for you, the problem is one of the following:

1. Whoever did your paid search campaign did not know what they are doing
2. Your competitors have a different business model (for instance, subsidizing one business with leads from another, such as airlines selling vacations in order to drive plane utilization up)
3. Your business’ cost structure or product pricing is misaligned with your competitors
4. Your competitors are thinking in terms of net margin dollars or LTV and you are not

I can tell you this – if all of your competitors are bidding on a keyword and you find it too expensive, it’s not that your competitors are idiots – there is some disconnect you need to ferret out.

More sophisticated marketers could be driving you out of the market for certain keywords that you could otherwise afford, if you only truly knew how valuable they really are to you.

Also, if you are relying on a trusted partner doing your paid search for you, all on a pure CPC basis, who is not suggesting you take your game to the next level but is simply happy to continue spending money on your behalf …you need to have a conversation with them about tracking cost-per-action or cost-per-conversion, or find another partner.

You can’t attain any ends without employing the right means, so consider the end and get moving!

The problem with valuing links

Some years ago, several SEOs calculated and published PageRank tables based on Brin and Page’s original paper. However, I couldn’t find any evidence of anyone ever doing measurements to check or calibrate their tables; you can easily find some if you do a Google image search on “google pagerank table.”

Most of them appear to show that each level is worth 5.5 times the previous level—for example, a PR5 link is worth 5.5 PR4 links and so on.

To verify this, it seems to be extremely difficult to figure out how or why an individual page has a particular PageRank, short of spidering the entire web yourself and reproducing the PageRank calculations yourself, or using a tool such as LinkScape or Majestic-SEO.

A clever trick we can use

However, there is a way to examine entire websites (or at least, their home pages); Google already provides PageRank to us of a sort, via their Toolbar PageRank metric. Google has also already spidered the entire web for us. With a simple Google query, it is trivial to figure out how many backlinks a website has (the industry-standard notation of brackets means that you should type in every character you see between the brackets when doing your search):

[“searchengineland.com” –site:searchengineland.com]

This query will return all web pages that reference “searchengineland.com” that are not located on searchengineland.com domain itself. This includes web pages that have links to the home page as well as web pages with links to deeper pages. It also includes references to the website that are not a link (i.e. if someone references searchengineland.com in an article but does not make it a hyperlink), but many in the SEO industry speculate that the search engines then convert that into a link and count it, which I am also assuming here.

The theory

Knowing that Brin and Page’s original PageRank paper specifies PageRank is a logarithmic measurement, I then theorized that a graph of website home pages’ toolbar PageRanks versus the log of the number of backlinks to those sites should be roughly linear, could give us insight into the value of links at different levels of PageRank, and could perhaps aid us in building a PageRank table based on actual measurements.

One might argue that for small websites, the PageRank of links coming to them might diverge significantly from the average (for instance, a small website may have a few PR8 links and get a big boost in PageRank), but intuitively, large sites should not diverge from the average by too much. The larger you get, the more you should resemble the average website—if you have millions of links, they can’t all be PR8 links and are more likely, on average, to be similar to the “average” link profile of the entire web.

So, I decided to simply measure the Toolbar PageRank of 50 websites and to plot it against the number of backlinks that they each have, on a logarithmic graph. One would think this graph would exist somewhere in the industry but I have never seen one (if you know of anyone who has done this before or any papers, please comment below).

What I got was the following remarkable graph:

Toolbar PageRank versus number of backlinks

Testing the theory

Any good theory should have some predictive value, so, armed with the equation for a linear fit to this graph, I checked how many links there are to a co-worker’s new website (it’s a great place to Buy Baby Announcements) and found it had 177. The equation predicts the website, or at least, its home page, should have a PageRank of 2.6, and sure enough its Toolbar PageRank shows as 2.

Try it yourself with a few sites: take the log of the number of backlinks to a website, multiply by 1.4063, subtract .4747, round the result down, and check that against its toolbar PageRank.

A caveat:It’s important to note that a site may be ~1-2 PageRanks above or below its calculated value depending on the average PageRank of the links coming to it, i.e. if you are doing a great job and have very high-PR links, your site will be above its predicted PageRank. Quite often though, this simple equation is surprisingly accurate.

An interesting observation

The high-toolbar-PageRank sites that were below the line (i.e. whose reported PageRank seemed lower than it should be based on their links) included Dailymotion and Wikipedia—notably, both user-generated content sites. High-PR sites that were above the line included usa.gov and cnn.com. This is certainly not a significant sample but suggests some further study on UGC sites versus news, government, or .edu sites is probably worthwhile. It could also argue for a “hidden variable” in the numbers such as TrustRank (Google discloses on their website they use 200+ variables in their organic ranking algorithm on their website so this seems highly likely).

So, how much is a link worth?

Well, we can’t say what a PR1 link or a PR2 link is worth in absolute terms, since the equation measures the “average” value of links on the web. However, the slope of the equation is the same regardless of how you value a PR1 link, so we can say with some confidence that each level link is worth (drum roll please…..) 5.14 times the previous level. Those old-time SEOs armed with the PageRank paper calculations were not too far off with their estimates of 5.5 after all!

“Average” number of links required to reach each toolbar PageRank level

So, per actual measurement, a PR3 link is worth 5.14 PR2 links, a PR7 link is worth 5.14 PR6 links, and so on. And as it turns out, the SEOs of years gone by that calculated their PageRank charts weren’t too far off with numbers like 60 million or 80 million links to become a PR10 site. On a log scale, those are really close to 28 million. Note that all the PR 10 sites came in above the curve, so for instance, one made it with only 11 million links—but all of this is close enough for our purposes.

This is of great significance to link-building campaigns—if you have a choice between sending an email to ten webmasters requesting 10 potential PR4 links, versus two webmasters requesting a single PR6 link, it actually is more efficient to spend significant time crafting your email for the PR6 link as it is worth 5 x 5 = 25 PR4 links.

Future posts will dig closer towards placing actual monetary value on links. Hopefully this series will inspire others in the industry to do some analyses in this area which sorely needs the attention!

Postscript: Caveats and assumptions

If Google reported toolbar PageRank to an additional decimal point, then it would probably show that some sites are really 10.1, 10.5, 10.9 etc (think about it—two PR10 sites clearly don’t have identical PRs). The only effect of accounting for this would be to shift the Y-intercept up; if you assume all the PR10 sites were really “average” PR 10 sites, then they should be, on average, PR10.58—halfway to 11 on a log scale. All the PR3 sites would be assumed to be PR3.58, and so on. Although the graph as shown does not reflect this assumption, the equation disclosed does include this adjustment—and either way, it has no affect on the slope which gave us the “each level is worth 5.14 times the last level” factor.

This entire exercise also assumes that Toolbar PageRank actually means something (it’s still rather vague, and the industry has no clear consensus on this point). It also assumes that Google’s “520,211 results found” metric is actually reasonably reliable.

Finally, some PageRank 10 sites that were considered were excluded if they would obviously warp the calculations, such as Adobe (due to its Reader) and Mozilla.com.