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PPC Not Dead After All?

  |  October 22, 2007   |  Comments

The ad model reaches middle age, getting a facelift from targeting and optimization.

Do we still need pay-per-click (PPC)? Last time, I pondered the past and future of the PPC (define) ad model and wondered if its best days were behind it. Clearly, PPC had helped to rebuild the interactive advertising industry at a key time, but is it past its useful life?

The answer is yes, but it's beginning to seem like a qualified yes. A blogger, who pointed to my column, surmised I wasn’t ready to declare PPC DOA and instead suggested the model had reached middle age. Actually, that’s a pretty accurate description of my feelings, especially if you view middle age as a time when most actions are ruled by wisdom and depth, not as a time to slow down.

In other words, the core PPC product -- generally, search ads targeted only to keywords and built around a direct-marketing scheme -- won't go away. I suppose neither will logos painted on the sides of buildings and late-night infomercials for exercise equipment. Each is effective at achieving its goal, which is generally, make a one-time offer and a one-time purchase.

Like any good middle-ager, don’t expect PPC to stay put or do the same things it did in its wild, unfocused youth. Rather, PPC will grow and mature into richer offerings more tuned to advertiser needs. In particular, two trends appear to be bringing PPC to middle age: targeting and optimization.

The Joys of Targeting

Another e-mail I received, sparked by my last column, simply said: “You don’t know Quigo.” I do know Quigo, which brings fresh alternative thinking about PPC. From day one, the company built targeting into its offering and showed the rest of the world how more targeting can make PPC ads better.

Consider the offer put forth by PPC: you only pay when someone expresses interest, as connoted by a click. Advertisers want clicks, naturally. But to get a click, you have to rely on the publisher to put your ad in a relevant spot. Because the publisher keeps the ads (under most plans) down to the barest minimum of headline, text, and link, the advertiser has little chance of wooing the consumer with creative spark.

Simple keyword targeting, whether based on a search or on context, gets you pretty far, but that last mile is the challenge. A search for “bass” is either a guitar or a fish. It can get harder with context, because the serving software deals with hundreds of words on a page, versus just two or three in a query string. If your guitar ad is served on a site about fishing, you won’t get a click, and you won’t have to pay. But what’s the point? Why should you have to worry about the waste?

To alleviate this problem, Quigo pioneered an approach that categorizes sites and advertisers. Your guitar ad goes into a bucket of ads and publishers tied to playing music. The fish sites are entirely distinct, and unless you give the OK (assuming there is someone out there wanting to write the next great salmon rock opera, I suppose), you eliminate the waste.

Also, systems that categorize sites allow for the intelligence of media planners. Rather than assume a technology solution will result in relevant placement, categorized systems allow actual humans to be in control.

Optimize and Optimize Again

On the other hand, optimization is best handled when humans get a big assist from software. Consider the question of how much you should spend on a click in an auction-based environment. Most advertisers take a well-informed guess on price, which represents a single conclusion based on several variables. Certainly one start with how much one wants to spend on a click. That seems like an easy number to arrive at, but that assumes then one must possess a good sense of the revenue generated by a sale, and how much of that revenue can be allocated for the lead.

From that starting point, however, you have to then figure out what position you should be in, for which particular keywords, on which sites and during which days. Someone once described marketers as being the people who never took math. Pretty clearly, we’re looking at a complex set of numbers.

This has been the front of the other evolution in PPC: optimization engines. Google has extended the challenge by allowing advertisers the chance to measure the success of a click clear through to different versions of landing pages. More important, advertisers say Google is getting more transparent in its reporting of data back to advertisers.

Effectiveness Still Important

The ability to optimize is key. When the responsibility for setting price shifts from publisher to advertiser, old frustrations about understanding advertising's effectiveness don't go away. Just because you’re only paying for an action, that doesn’t mean you should accept that that action generates value. As we move toward a more mature PPC, advertisers will have greater ability to take control over their spend.

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Gary Stein

Gary Stein is SVP, strategy and planning in iCrossing's San Francisco office. He has been working in marketing for more than a decade. Gary lives in San Francisco with his family. Follow him on Twitter: @garyst3in. The opinions expressed in Gary's columns are his alone.

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