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The biggest challenge with marketing
metrics is the Internet which is the Wild
West.
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The Internet is the new frontier for
marketing and is not yet completely
figured out
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In the American West of the 1800s,
there was lawlessness, bandits and ad
hoc laws and approaches for survivial
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Innovation occurs rapidly and rules are
continuously re-written – if written at all
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When we first started this journey, I
talked about a marketing divide – that
few organizations “get” data-driven
marketing and majority do not
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Our approach to understanding Internet
marketing is to start by focusing on the
biggest piece of online marketing
budgets and work our way forward from
there.
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In November 2008, eMarketer published
a survey that found Search Engine
Marketing (SEM) was 45% of online
marketing spending and was predicted
to be 49% of spending in 2010.
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When we talk about Internet marketing
metrics, there are some basics like CPC,
TCR and ROA that take a bit of time to
get used to, but the effort is worth the
result.
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When we talk about Internet marketing,
the discussion starts with the most basic
discussion –
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In 2004, on a flight from Washington, DC
to Chicago, I happened to sit next to a
senior partner from a big five consulting
firm
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He said to me –
“I don’t get it – search is easy. What’s
the big deal about Google?”
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Search engines are fairly
straightforward. They create “robots”
that scour the Web and tabulate all the
web pages in existence and the
keywords on these pages.
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We, as users, can search this very large
table for specific web pages with
corresponding keywords.
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The challenge in SEM is ordering the
very big list of web pages with keywords
you want in some way to make sense.
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In the early days of the Internet, search
engines counted the number of
keywords on a page to define the search
order – more occurrence meant higher
rankings
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So web developers just listed their
keywords lots of times on a each page to
influence the search order. To fight this,
Yahoo! Had buildings full of people to
review these results.
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But in 1996, Larry Page and Sergey Brin,
had an insight that would change the
world. They had the idea to rank-order
search web pages on the number of links
to a given web page.
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That means that the more people who
link to a web page, the higher the
ranking of the page.
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On September 4th, 1998 – Google was
incorporated and patented as the best
search engine algorithm in the world.
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The marketing business model for the
Internet up until 1997 had been based
upon CPM – Cost Per Thousand
Impressions.
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That means that every time an
advertisement appears on a web page
(impression), the advertiser is charged
the rate.
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1997 brought about the first CPC – Cost
Per Click – model, which is now the
standard for measurement in SEM.
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In the CPM model, the person doing the
search is most important and advertisers
pay just to be seen by the searcher.
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In the CPC model, the company being
searched is more important, and
advertisers pay for a click-through that
has good odds of resulting in a purchase.
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The CPC for Google is very expensive –
you can spend hundreds and thousands
of dollars a day depending on the
volume of search words and how broad
your geography is.
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So how do we ensure that we are getting
the biggest bang for the marketing buck
in SEM?
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For this, we need a few more metrics
and two essential ones that we will
discuss.
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Natural searches are the search results
based in part on the number of links to a
page from other sites.
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Our focus is on the sponsored search
results since we as marketers can control
these.
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When we talk about about sponsored
search marketing, we need to
understand that there are two more
terms that we should be familiar with…
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Bid Strategy – the placement you would
like to get on the page.
1 – 4 are the first 4 sponsored links
5 – 6 are the following two
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Match Type – the user must type the
exact words (exact match type) or the
words can be typed in any order (broad
match type). Match type can also
include phrases (phrase match).
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In Match type, there is also negative
matching which allows us to exclude
specific words/phrases.
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VOIP can have a broad or exact match
type. For example, “VOIP calls to Turkey”
is a phrase match.
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But Turkey is also part of a brand name
of alcohol. So using negative match type,
we can exclude the phrase “Wild Turkey”
so that alcohol results would not be
included.
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Transaction Conversion Rate
The percentage of customers who
purchase after clicking through to your
web site
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In addition to CPC, the next really useful
Internet marketing metric is click-
through rate (CTR)
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Click-Through Rate
The percentage of customers who click
through on a link and is calculated from the
number of clicks divided by the number of
impressions (ad served).
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The central idea of SEM marketing is
that you buy keywords and placement
with specific match types.
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You might bid $4 for VOIP with a broad
match type and a bid strategy of 1 – 4.
That would mean…
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Looking at other bids and strategies, you
would end up paying up to $4 for every
click after a VOIP search.
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Now, Google works on a volume basis. If
you have a high historical CTR, you can
get a higher placement for a lower CPC.
Google favors those who have high
volumes and high probabilities for CT.
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It favors large brands with a history of
good CTR. That means if you are new to
the SEM market, with no history, it will
be difficult to get higher positions at fair
pricing.
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The take rate is just the percentage of
customers who click through times the
percentage who convert to a sale once
they click through.
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To complete the SEM metrics, we need
to cover the equivalent of ROI for SEM –
Return on Ad Dollars Spent (ROA)
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Return on Ad Dollars Spent
Measures the efficiency of generating
net revenues from ad dollars spent
when the end action is the purchase.
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Optimizing Your SEM Strategy
1. Optimize the Publisher Strategy – Figure out which publisher will give you the best
results for the money you are spending.
2. Optimize the Campaign Strategy – Analyze the campaigns within the publisher to
determine the campaign changes needed to deliver the most value
3. Calculate the KPI Impact – Determine the impact of campaign changes on key
performance indicators (KPIs) such as net revenue and ROA.