• http://www.rimmkaufman.com George Michie

    Great piece, as always, Sid. And to add to the complexity, advertisers should also factor in the extent to which their brand PPC ads cannibalize sales from their organic listings. The cannibalization is not 100%, and that has been shown time and time again. But it is closer to 100% than 0% for most well established brands.

    The other piece of the puzzle is: what happens to those potential visitors “lost” from not having both a paid search ad and the top organic listing? What fraction end up on your site through an affiliate? What fraction find a competitor’s site and never give you a chance to make the sale?

    The true economic lift associated with clicks on brand paid search ads is a complicated question, but amplifies your point: consider carefully how much you should be spending on that traffic that is heading through your front door with or without the ad.

  • http://www.efrontier.com sidshah

    Hi George,
    Thanks for the compliment. Would love to see your findings on SEO/PPC cannibalization. My findings so far have been inconclusive (on average). However, Anindya Ghose from NYU says that on average you have 4-6 % profit lift from having both SEM and SEO ads as against only one of them. However, he didnt deal with subtleties such as the SEM/SEO relationship between strong vs weaker brands etc.

  • http://www.cpcsearch.com Terry Whalen

    Hi Sid,

    Great article – thank you. After reading the above, I immediately adjusted brand term bids for one of my clients in an effort to gauge the effect on CPC’s and cost/conversion.

    You say “When we raised the bid by 20%, the impressions increased,” but I see that impressions actually decreased, which does not seem to be the result one would expect. Of course it may be that search query volumes decreased, even though if anything the advertiser had higher ad rank due to increased bid.

    A key metric, as you point out, is that avg. CPCs shot up almost 3 X when bid was increased by 20%. I’ve seen many instances where increased bids leading to ad positions very close to 1.0 do not result in large increases in avg. CPCs; in these cases, it may make sense to keep bids high and get that 1.0 (or very close to it) ad position.

    Too, I think that many advertisers are happy to pay a premium in terms of avg. CPCs and avg. cost/conversion on their branded terms in order to *always* be in the top ad position on their core branded terms. It may be the case that the increase in cost is dwarfed by brand and corporate positioning concerns or goals (i.e. the advertiser may not want to be in the #2 spot 5% of the time, from a brand-strength perspective, especially if the advertiser in the #1 spot is a competitor and the searcher is a high-value investor/prospect/journalist, etc.). I guess another way to put this is sometimes brand considerations are high on the list for branded terms. Thoughts?

  • http://www.rimmkaufman.com George Michie

    Terry, absolutely right. For well known brands offline advertising budgets dwarf the online spend, and the brand portion of online advertising is a rounding error on their books. For these folks who do 8 and 9 figure branding campaigns that can’t be tracked to direct marketing metrics, the money we’re talking about here is immaterial.

    However, for the rest of us…:-)

  • http://www.cpcsearch.com Terry Whalen

    Right, but I was actually just talking about non-brand (AdWords) ad spend versus spend on branded terms. Typically non-brand click spend dwarfs brand term click spend, without even bringing offline into the discussion.