What Google’s “Caffeine” Update Means For Paid Search Campaigns

Google recently announced that a massive operations overhaul is in the works. “Caffeine,” as it’s known internally, is described by Google’s Matt Cutts as primarily driven by “under the hood” changes to improve Google’s indexing technology, allowing the engine to be more flexible and efficient in the way it collects pages. He went on to say that while power-users may notice some minor changes to search result pages, no major user interface changes are to be expected with this update.

Based on Matt’s description of the algorithm changes, we shouldn’t expect to see vastly different search results in the short run. However, it sounds like Google is putting infrastructure in place to index web pages more quickly, be more effective in ranking real-time updates (from blogs and social media) and to provide more accurate local search results. These changes will remedy some of Google’s current shortcomings and put them in a unique position that over the long term could change the user experience significantly.

We all know that Google’s organic and paid search listings are two completely separate entities and your performance or lack thereof in one does not impact your standing in the other. While the upcoming update will directly impact organic search results, paid search managers should not completely write-off the update as insignificant to the PPC world.

Any change to Google’s algorithms, whether on the organic engine or in the AdWords platform, in one way or another will effect the user experience over time. In this case, as with previous algorithm updates, Google is pushing forth changes that may alter the mix of organic results.

Many have speculated that the Caffeine update is geared directly towards competing with recent moves made by Facebook (acquiring FriendFeed) and the rising popularity of Twitter’s real time search capabilities.

As a PPC manager, what should I do?

In almost all situations, any change brings some level of uncertainty and the Caffeine update is no exception. Thankfully for PPC managers the upcoming update should only affect the organic listings and will not directly alter cost-per-clicks in anyway. This however does not mean that PPC managers should ignore the “Caffeine Update”.

Most SEM managers have multiple responsibilities, including maintaining the SEO and PPC programs (not to mention affiliate and email marketing duties, etc..). A well-balanced SEM campaign often includes a strategic mix of SEO visibility complemented by PPC listings and vice versa. In some cases, SEM managers don’t feel the need to bid on certain terms due to outstanding organic visibility. Over the next few weeks, do yourself a favor and

Monitor your SERP positions closely

No one is 100% sure how the latest update will shakeout, so your best bet is to run a position report on key terms and watch for any fluctuations – not to mention the fact that it is a generally smart idea to track your SEO positions from time to time. If you are one of those mangers that have shied away from bidding on keywords (because you’ve felt that your SEO visibility is sufficient) you may want to start supplementing your organic efforts with PPC listings.

Google is responsible for the Lion’s share of traffic for many online businesses. While it’s great to have a reliable traffic source, it’s also extremely risky to rely so heavily on one source. To mitigate this dependency and in the spirit of reducing risk, diversify your SEM campaign (create campaigns on Yahoo, Microsoft adCenter as well as other niche vertical search engines like Business.com).

The next tip should go without saying, but paying attention to your competitors is also very important. I’m not suggesting that you increase bids simply because your competitor has (you should base bid-management decisions on CPA and ROI metrics). However, it is always useful to know how your competitors are reacting to changes in the market.

To summarize, with every change to the Google algorithm comes a level of uncertainty, and by taking proactive steps to monitor and minimize your risks, you will be in a better position to make smart decisions for your PPC accounts.