With the Super Bowl played on Sunday, several of Covario’s clients who ran spots during the game are using the opportunity to measure the impact of offline ads on online traffic and brand interaction by measuring differences in search behavior over the event.  We have done this several years in a row for our customers –not just around the Super Bowl, but also around major sporting and cultural events like the Olympics and FIFA Euro Cup.  The impact of Event Marketing on search is strategically important, and intuitively surprising. 

Event marketing like the Super Bowl is different.  The size of the audience is so large, and the brand reach is so significant, that in almost every case there is a corresponding major impact on online traffic and brand interaction. What is strategic is that event marketing provides the ability for advertisers to get a strong read on how offline advertising impacts online behavior.  And this understanding can potentially be used to gauge how other investments in offline, specifically sponsorships and TV spots, drive online behavior.  We will ignore for the moment that the correlation between online spend and offline result is not really transferrable to day to day program TV spots  on online performance given the entirely different nature of the audience and the size of the audience, but it does help create a statistic about how these important channels interrelate – and they do. 

Second, the results are often intuitively surprising.  An advertiser doing a Super Bowl ad would probably enter the ad with a hypothesis something along the lines of “I will get a huge uptick in casual visitors to the site, and if they get there through paid search, I will get huge uptick in cost, as well as cost per acquisitions as the overall conversion rate will go down.”  i.e., broadcast media is a dull instrument that moves the masses, but is terrible at identifying qualified site traffic.      

This is not the result we usually see.  In the previous Super Bowl, we did this study for one of our advertisers.  Here are the results.

• We used the time period before the Super Bowl as a baseline – so we would measure results for the 3 days after the event to the 3 days before; the 2 weeks after to the 2 weeks before; and the 3 weeks after to the 3 weeks before, and so on. 
• We did see a big increase in the costs, clicks, impressions and general visitors to the site.  So first part of the hypothesis confirmed.  Check!
• However, after the initial 3 day spurt where we saw the CTR and CPA increase slightly, we say two key issues – there was 3-4 weeks of sustained interest in the brand and the CPAs actually got much BETTER.  The second half of the hypothesis was rejected!
• And this behavior is completely consistent with other studies we have done around other events like FIFA Euro Cup and the Olympics. 

So this leads to the question of “why?”  Apparently they were far more effective at identifying key customers segments and socializing the brand with an online call to action that drove significant results. Just through search, we saw conversions up 50-60% on a gross amount over the 3-4 weeks after then event, even though click volume goes down, and they did not return to pre-event levels until after 4 weeks, where even then they sustained a 10% higher continuous run rate than pre-event. 

Was the expenditure on the Super Bowl Ad worth it for this advertiser?  A rough estimate says that the spots run cost ~$12-15M at the time of this experiment.  The increase in online traffic just through paid search created a 4 week ROI of $3-3.5M, and an ongoing 10% higher run rate, which if attributed to the Super Bowl Ads, had a continuous value over 12 months of ~$4.0-4.5M.  We did not factor in organic or direct to site, however assuming that paid search contributes ~50% of the online results, we could say that there was ~$10M in attributable value to the organization from the ads.   So at a high level, directly attributable one year value does not justify the expenditure. And now commence with discussion of “all the other things that pulled through from this ad” from a branding standpoint – but attribution modeling is for another blog.

• ACTIONABLE INSIGHT #1:  Attributing online value to event marketing programs like the Super Bowl is a valuable exercise.  We recommend the methodology of using the pre-event time period as a benchmark in a particular locality and comparing to the same time period post event marketing program to measure lift and change in behavior.
• ACTIONABLE INSIGHT #2:  Event Marketing usually “works” – by this we mean that it drives large increases in traffic quickly, and conversion results within 3-4 weeks at rates far above pre-event levels.
• ACTIONABLE INSIGHT #3:  Event Marketing has a sustainability of 4 weeks in most cases, meaning that paid search marketers should plan on increased budget levels for 4 weeks after the events, or risk going dark on keywords relating to the campaigns.

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Covario INFLECTIONPoint 2010 brought in Mark Mahaney (Citi) to discuss the outlook for search based on Industry Trends.  While last year, we saw tremendous budget freezing and slashing, this year is showing budget increases, namely in Online Retail and Travel.  Automotive is still lugging along, and it appears that Financial Services is taking the longest to get back on track (shocker! since they initiated much of the spiraling recession).  The Search budget returning reinforces the notion that the data driven marketing techniques can reap the benefits of increases by leveraging numbers to tell the ROI story. Keep upping the ante on your analysis and providing insights for your marketing programs, and the budgets will come.

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Penny Baldwin (Yahoo) noted during her keynote address at INFLECTIONPoint 2010 that you don’t need to reach the 600 million consumers on Yahoo, but the 6 million consumers right for you.  She contends that the future of search marketing is combining the power of technology and human creativity to build business, continuing with the ongoing theme of cross-channel customization of marketing programs.  Yahoo has seen dramatic ties between the use of display image and video ads alongside a powerful search marketing campaign, and now ties social network outlets into their search programs for even more strength in brand revitalization.  Both Penny and Matt Belkin (Omniture/Adobe) spoke to the need for marketers to open up advanced analytics within search marketing campaigns.

The need to move the needle in search data analysis is evident.  Search is in a unique position when it comes to data.  There are so many ways to slice and dice it that you have to be focused on what you are trying to accomplish.  Getting the balance of initiatives and answers while avoiding being stuck in the weeds can give stakeholders the right views to engage in decision making.  Too often we use far more metrics than necessary to understand the outcomes, which leads to more curiosity and questions than actual business strategy.  Remember to continue refining, but be wary of the bog of information that can bring business growth to a standstill.  Jay Middleton (Adobe) said that agreeing on key metrics can take your business into an outpouring of increased strategic initiatives that have a greater impact on your bottom line.  Make sure that your organization is not just looking at surface metrics, but really tying together a holistic view of channels and evaluating the right numbers for these channels.

According to Mark Grote (Microsoft), and I absolutely agree, Search just isn’t sexy in the boardroom.  While the techie geek in us loves Search, it just doesn’t have the flash of a display ad or the showmanship of a video spot.  It provides nothing of viewing palate valor, so you need to take the raw data, cultivate and compare it to other channels, and turn it into a compelling story.  The bottom line is testing to discover the right media mix modeling  bringing together the right levers for your user behaviors and ultimately your conversions.

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The influence of Search from Social is undeniable, but how are you invested?  It’s no longer a one-way conversation, and the more you know, the more powerful your programs’ impact can be.  At INFLECTIONPoint 2010, Dennis Haugan (T-Mobile USA) advises us that we want to be able to enter the world of social media without seeming naïve, or even worse, blindsided by negative product perception. By building out your social monitoring, you can know consumer sentiment so that you’re prepared to have conversations when you start your foray into the world of social dialogue.

The first step to investing is keying in on listening reports which allow you to identify your key evangelists and key detractors.  Know how to engage with these bloggers and influencers to obtain more distribution (i.e. more listings in the search engines).  Design for them to fit into your overall search marketing puzzle.  Are you trying to start the buzz early?  Provide them with “first glances” or trial runs.

Barry Kresch, another panelist at INFLECTIONPoint 2010, thinks that Search and Social share vocabulary.  Social reports also provide industry terminology that you might not currently be using in your Paid Search efforts or in content on your pages to improve SEO efforts.  Keyword discovery within social can help you perform well with consumer trending.

Actionable Insights:

1) Clarify roles throughout your organization.  Maura Ginty (Autodesk) suggests building a Social Policy that includes Legal, Customer Service, Product teams and Marketing, as social media has implications relative to all departments.  Everyone needs to be prepared.

2) Create the experiences.  Give consumers the opportunity to interact with you in an online social setting, whether through participation on your site, other large social outlets or in Industry-specific community sites.

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Branding always seems elusive.  Putting together branding campaigns can affect several teams – onsite and offsite.  Get ahead of the game by organizationally preparing to respond to multi-channel brand campaigns.  On a panel at INFLECTIONPoint 2010, David Roth (Yahoo) reminded us that the key place in joint marketing efforts resides in organizational preparations. Building out response strategies at the beginning of the campaign gives you the flexibility to adapt quickly as the campaign progresses.

Organizational readiness is key in bringing about great branding campaigns.  You need to be set up organizationally to change the messaging and start the “next move” as soon as possible.  Gary Milner (Lenovo) said if you really need television ads [or other channels outside of search], you need to respond, but you have to monitor and react when the decay around that channel happens as well. As you see the attraction to your ads slow, you should alert the appropriate channels and begin the next wave.

According to Corey Carrillo (Intel), letting your branding campaign linger after its longevity can shift its positive momentum.  Keeping it fresh allows you to continue to forward brand effectiveness that in turn generates higher loyalty – monetized actions and non-monetized actions.

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Shar VanBoskirk just closed her remarks at Covario INFLECTIONPoint 2010 with bold statements of how this will be the year that advanced search marketers break ahead of the pack.

1. Apply advanced analysis to your search program

• Go beyond reporting and dig into the data – continue to increase the complexity of the questions you are asking: revenue to incremental revenue, customer counts to user profiles
• Start using predictive analysis when building campaigns – determine which customers are likely to purchase product/complete forms/build loyalty and build campaigns around their habits
• Optimize your campaigns consistently – ask yourself if search is the best method to reach certain types of customers; use the best offer that fits the customer

2. Build user intent profiles

• Go beyond what keywords and search engines are being used – find out what matters to users
• Anticipate what users are planning to do next, not just what they’re doing
• Use multiple sources to compile the information – open up to sources outside of search-related statistics

3. Create a holistic strategy – “Think Bigger”

• Focus on how to extend your search program – look for complementary media to drive more traffic
• Include search in a more holistic customer program
• Increase the avenues of impact – it is not enough to target one goal but open up your strategic goals. If you focus on lead gen with occasion branding, open up the branding channel.

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Imagine going to the store to buy 100 widgets. They cost $1.00 each. But then you notice exactly the same widgets with ever so slightly different packaging for $0.50 each. Which widgets do you buy?

Now imagine that your autocratic boss sends you to the store every day with the instructions “buy the best widgets you can buy, but spend no more than $1.00 per widget.” Which ones would you buy? Would you buy 100 widgets for $50 or 100 widgets for $100? What if your boss added “I will increase your salary by 10% of the amount you spend”?

Search marketers sometimes find themselves in exactly this situation, able to buy a certain number of clicks for a particular price, or buy exactly the same clicks for a fraction of the price. Let me provide an example. For one of our customers recently, we reduced our maximum cost-per-click (CPC) bids to about half of our previous actual CPC cost for two exact match keywords on Google. The charts below show the CPC and click performance over time for these keywords.

• Green Line — Keyword 1: The traffic for one of the keywords responded in the stereotypical way – Google’s auction moved the ad to a lower rank, and fewer searchers clicked on it.
• Blue Line – Keyword 2: The traffic for this ad did not change at all. We received about the same number of impressions, the same click-through rate (CTR), the same number of clicks, and the same number of conversions as before. Thus, in some cases, you can get exactly the same traffic for half the cost.

We found this behavior on about half of the keywords we tested that are:

• branded terms,
• in the #1 paid search position, and
• $1.00 CPC or higher.

Such keywords often account for a substantial fraction of a brand-name company’s paid search traffic and conversions, and they typically already provide excellent return on investment (ROI), even without reducing the cost. Furthermore, these are terms that the CMO might just type in to their favorite search engine and then complain “Why aren’t we in the #1 ad position?” Consequently, both agency staff and in-house search marketers are reluctant to take any risks on these keywords. But, because the spend on these keywords is also high, the potential cost savings are substantial.
There are three reasons this may happen.

1. Google sometimes promotes an ad with a high “quality score” to the top of the SERP, putting it ahead of competitors with higher Ad Rank. You can pay to stay ahead of your competitors, but you may not have to!
2. Sometimes dropping from 1st position to 2nd or 3rd position does not reduce the CTR or quality of visitor. This is especially true when the top ads appeal to different segments of searchers, e.g. if United Airlines and United Van Lines ads appear for the query “United”.
3. If you reduce your bid and end up behind your nearest competitor on the SERP, that competitor’s CPC typically goes up (sometimes very significantly), and the competitor may reduce its bid in response to your change.

So a great way to sabotage your SEM is to spend more and receive no marketing benefit. This is a special case of high marginal CPC, which is a concern for every paid search keyword.

To understand marginal CPC, imagine that your autocratic boss sends you to the store every day with the instruction to “buy as many widgets as you can, but spend no more than $5.00 per widget.” The shopkeeper informs you that the more widgets you want to buy, the more expensive each one is. You can buy 100 widgets for $100, which is $1 each. Or buy 150 widgets for $300 or an average of $2 each. But if you wanted to buy 200 widgets, that would cost $800, or an average of $4 each. Remember, your instruction was to buy as many widgets as possible for less than $5 each. What should you do? Buy the 200 widgets? No! In all reality, the last 50 widgets, of the 200, cost $10 each (i.e.: [$800-$300]/50 = $10 each). If the widgets are worth $5.00 each to your company, your company’s interests would be best served by buying only 150 widgets.

Marginal CPC has also been called incremental cost per click (ICC). Based on the incremental cost, one can calculate an incremental ROI. Taking the marginal CPC into consideration in maximizing the return on paid search advertising spend has been termed positional optimization, though that is somewhat a misnomer since what matters is the amount of additional traffic gained per extra dollar spent, regardless of the absolute position.

Why does this matter? In principle, if you are not considering marginal CPC, you are not optimizing your paid search campaigns in the sense of maximizing the benefit that your advertising dollars can produce. And if you aren’t optimizing, you cannot determine whether a performance improvement is due to a strategic change or due to a tactical change, such as a bid adjustment. Thus, continuous improvement begins with an optimization methodology. In practice, it is typically possible to improve campaign performance by 20% by optimizing (considering marginal CPC) vs. just adhering to ROI constraints. Using a generic model of CTR vs. ad rank in the optimization provides some improvement. In order to obtain the full improvement, it is necessary to continuously test the marginal CPCs of high-volume keywords. This, by the way, also protects you against bid jamming.

Actionable Insight #1: If you are shopping for a bid automation system, find one that can optimize based on marginal CPC.

Actionable Insight #2: If you use a bid automation system that does not optimize based on marginal CPC, take your top 10 keywords by spend out of the bid management system and manage them by hand. You can increase their performance while simultaneously reducing your bid management fees.

Actionable Insight #3: If you set bids manually, get someone on your staff with an operations research (or similar) interest involved. This quantitative optimization perspective can substantially improve your process and campaign results.

Actionable Insight #4: In the process of writing this post, we searched for written information on which bid management systems optimize based on marginal cost per click, and only found one white paper. If you are a bid management vendor, please comment below with a link or high-level description of how you manage marginal cost per click and we will publish it here – free marketing and SEO link juice!

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Today we announced the acquisition of Netconcepts, which is a strategic game changer in the world of SEO management for large brands.

Here’s why:

• Covario has focused on building SaaS technologies and predictive analytics to lower the costs of keyword discovery, site and page level auditing, reporting and making recommendations on the highest ROI activities to make on a website – at least as far as SEO is concerned.  Organic Search Insight™ is our flagship platform in this area.
• Enterprise SEO practitioners need an easier, faster, more scalable way to make changes to their sites!  The goals of the corporate IT department and pre-search engine era enterprise web content management systems are unfortunately often not aligned to leverage the best practices of SEO.  For a large advertiser, the top goal of IT is data center consolidation to drive large scale savings out of the cost structure – which leaves little room for rapid development digital marketing efforts.  Legacy url structures, load balancing programs, and poorly configured content management systems are a few examples of the types of barriers to best practice SEO at most large companies.
• With the Netconcepts’GravityStream product, we can now vault over these problems.  We can create SEO-optimized pages, at scale, allowing advertisers to take advantage of the opportunity of SEO quickly and easily, without having to involve IT and distract them for their important other missions.

Netconcepts has focused on the retail and e-tail spaces for the past few years, and has built up a tremendous group of over 50 e-commerce and retail customers from Cabela’s to Ann Taylor to The Foot Locker, as well as several leading interactive and holding group agencies who leverage the GravityStream solution.  Combined with Covario’s strengths in the high tech, consumer electronics, life sciences, media and consumer packaged goods sectors – the two organizations now have solutions and experience in many different disciplines for SEO.

Finally, Netconcepts brings a storied reputation as one of the “original SEO shops,” and definitely one of the first to deploy licensable software as part of their offering.  Stephan Spencer and many of the team are noted authors and bloggers on the subtle science and technical details of SEO.

So we are very excited to make this acquisition, to weave the product into our SEO software platform, to bring on an incredible set of new clients, and to bring on a great new team as well.

We will be discussing the acquisition and our overall product roadmap at INFLECTIONPoint 2010 – aka Covariopalooza! – February 3rd and 4th in San Diego at the Hard Rock Hotel.  So for Covario and Netconcepts clients, make sure you register!

Actionable Insight:  If you have any questions or want to discuss the Covario-Netconcepts acquisition, write Paul Borselli at pborselli@covario.com and he will get you in touch with the right folks to answer your questions.

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The other day, I witnessed a friend shopping on eBay. He placed a bid on an item, then switched to a different Web browser and placed a higher bid under a different username. He then switched back to the first browser and placed yet another bid. He continued this effort for a few more rounds. “Dude, what are you doing?”, I asked. He smiled and stated, “I really want to make sure I win this item, so I’m placing a lot of bids.” I replied, “But you don’t need a lot of bids, you just need the highest bid. You may be needlessly increasing the amount you spend!” He explained, “That’s okay. Plus, I like having my name show up a lot in the bid history.”

Just as you could bid against yourself on eBay, you can raise the amount you spend per click via the Google AdWords (and other paid search) auctions by getting multiple ads for your company onto the same search engine results page (SERP). The way to do it is to get multiple entities that all represent the same company to bid against one another. Those entities include multiple divisions of your company, your marketing affiliates, your resellers, and your channel partners.

In The Economics of Search, Google’s Chief Economist, Hal Varian, shows that adding just one extra advertiser may change the auction dynamics and cause the search engine’s revenues to go up by a factor of five for the same SERP. Furthermore, if there are multiple ads with similar messages, the click-through rate for each of these ads will be lower than if there were only a single ad. This reduces each ad’s quality score, increasing the cost-per-click (CPC) still more.

A subtle way to compete against yourself is to set up an online store (store.acme.com) with a paid search budget, and give the online store’s marketing team credit for all traffic to store.acme.com, but none of the traffic from www.acme.com. The store will typically focus the majority of its search advertising on branded terms, which have the highest conversion rates but pick up a lot of traffic that the company would have also received without paid search, e.g. via organic search results. Because it is competing for clicks against the rest of the corporation, very little of the store’s marketing is effective at building the corporate brand or bringing in additional customers. We will address this in more detail in #7 (optimize for paid-only performance) and #1 (attribution) of the top 10 ways to sabotage your SEM.

More straightforward is to get multiple business units to bid on the same search queries at the same time using different domain names.   Since this typically adds a very small number of competitors to the SERPs for only a few corporate-branded and non-branded terms, the impact is moderate. Furthermore, the creative of these ads tend to appeal to different audiences – which is a good thing.

The most dramatic approach is to start an affiliate marketing program, and encourage the affiliates to bid on your branded terms. This typically adds a large number of competitors to the SERPs for all of your branded terms, as in this example that I stumbled across when investigating Internet service providers:

Six of the seven ads are ultimately paid for by Time Warner. By way of disclosure, I am a Time Warner shareholder, so I would really like the company to succeed…. Beyond dramatically increasing the cost-per-click and cost-per-acquisition of Time Warner’s own paid search marketing, the multiple affiliates create a confusing decision space and questionable customer experience for Time Warner’s prospects.

Several of Covario’s clients have recently updated their affiliate agreements to prevent affiliates from bidding on terms where the company does its own search marketing, primarily on branded queries. As expected, this lead to substantial cost-per-click and cost-per-acquisition decreases, and marketing savings. Here is a plot of weekly CPC for the five top branded queries of a major high-tech vendor:

Affiliates were prohibited from bidding on branded terms from the beginning of week five onward. The plot clearly shows CPCs dropping as the affiliates implemented the required changes to their paid search programs leading up to the deadline and, as our client enforced compliance, after the deadline. CPCs on the main branded terms dropped by about a factor of two. This is primarily attributable to reduced competition – the client’s own paid search ads were in-market basically 100% of the time in position 1 before as well as after the change. There was some concern that retailers might take the place of affiliates on these queries, but that has not happened.

Actionable Insight #1: Prevent affiliates from bidding on your branded terms

Affiliates can be very good at generating additional demand for your products and services by getting people to consider an item that they were not planning to purchase or by driving prospects to your site rather than your competitors’ sites from channels that your affiliates control. But there is no reason for affiliates to be better at search marketing on your branded terms than you are. If you revise your affiliate agreements to prohibit bidding on your branded terms, the affiliates specializing in this strategy will clearly earn less money, but it should not affect those providing value via their own e-mail lists and websites, ads on non-branded terms, etc.

Actionable Insight #2: Operate a search marketing “center of excellence”

Covario’s large advertisers typically have many branded terms, multiple domain names, and multiple business units distributed across multiple countries. Website content creation, SEO, and social media activity are typically distributed across multiple business units. Whereas these entities should clearly not compete against one another, a single command and control structure may also not be practical or desirable. A center of excellence with participation from all of the business units can promote consistent goals, metrics, analytics, and reporting. Software can enable each member to optimize their marketing efforts in light of company-wide goals and other marketing activities. Only by recording and communicating this myriad of marketing actions will it ever be possible to measure the true benefit of distinct campaigns, channels, or tactics and subsequently encourage the efforts with the greatest impact.

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For the second straight quarter (Q3 &Q4’09), paid search advertising in the high-tech and consumer electronics sectors grew by double digits.  In fact, growth between Q3 and Q4 was a very robust 16%, far beyond previous expectations. This was due in large part to a growing demand for ad space by consumer electronic companies during the holiday season.

The report also showed that the marketing programs being executed in the US by Yahoo and Microsoft, for its Bing platform, are working.  Bing more than doubled its US market share from Q3’09, and has quintupled its market share in the US over the course of the year.  And in Q4’09, this growth came at the expense of Google, which recorded its lowest market share in the US in the 3 years of the study – 72%.

Here are the major findings from the report we put out this week:

• Paid search advertising spend was up 16.6% between Q3 and Q4 of 2009.  This is a significant increase — far beyond Covario’s projected 10% increase.  Advertisers have been reinvesting in paid search advertising after pulling back on their spend during the first half of the year. Spending is expected to increase by 14-18% in 2010.

• The Q3 announcement of the Bing/Yahoo deal, coupled with large marketing programs by both search platforms are paying dividends.  Bing more than doubled its US market share in Q4, now at 13.3% of all spending in the quarter.  Google growth has slowed in the US — and it has the lowest US market share in 3 years — 72%.  However, Google continues to dominate foreign markets, particularly EMEA where it recorded a 97% market share in the high tech sector.

• With the large increases in spending, cost per click (CPCs) has increased as expected — by nearly 15% in the quarter.  CPC increases are expected in 2010 as additional spending is allocated to higher cost keywords.

The growth rates seen in Q4 were surprising.  In the first half of 2009, there was a 12-15% contraction in paid search advertising spend across the high-tech sector, and we expected a rebound in the 5-10% range in the second half of the year. In actuality advertisers have increased their spending by more than 30%. The high-tech sector is now spending about 12% more than they were a year ago on paid search advertising globally.  At the beginning of the year, we expected the entire year to be flat compared to 2008.

The big news of the year was the launch of Bing by Microsoft, and the Yahoo-Bing technology deal, which was announced in August and appears to be working for the search platform.  Large scale consumer advertising programs by Yahoo and Bing have kept Yahoo’s market share stable for the past 2 quarters, and more than quintupled  Bing’s market share since its launch.  Advertisers have been looking to expand their reach and inventory beyond Google, and Bing appears to be convincing them that it has a potential alternative – at least in the US and Canada.  Outside of the US, it is still all about Google.  No one has made a dent in their market share in EMEA.

The Covario Global Paid Search Spend Analysis is based on paid search spending from US-based high tech and consumer electronics customers, and spans Q1, 2007 through Q4, 2009. The combined paid search advertising spending of the analyzed brands represents more than $250 million annually.  All data is measured using Covario’s Paid Search Insight technology, which has been deployed with 20 different Fortune 500 firms, mostly in the high-tech and consumer electronics sector in the US, Canada and Europe.

> To download a copy of this analysis

ACTIONABLE INSIGHT #1: Expect spending in paid search advertising in the high-tech sector to rise by 14-18% next year, and CPCs to go up by 10-15%.

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