Home  › Search › Paid Search

Brand Discounts at the Major Engines

  |  October 14, 2005   |  Comments

Hybrid auctions reward brands and compelling, relevant creative. How to compensate if you’re not a name brand.

Google’s hybrid auction gives brands a huge discount on top positions. Starting later this month, MSN’s, Ask Jeeves’, and LookSmart’s PPC (define) keyword auctions will all use a hybrid system that rewards brands and compelling, relevant creative. The brand discount allows marketers to reach a higher position at a lower bid.

Why the discount? Searchers like to click on ads that are familiar, relevant, and compelling. This discount has existed for years within Google’s AdWords system but has become more pronounced, especially now that the new Quality Score system is part of the method of calculating AdRank within AdWords. Quality Score takes into account factors beyond historical CTR (define) when calculating the predicted CTR for a particular ad in a specific situation (e.g., match type, geography, length of search query, etc.). One factor that seems to influence predicted CTR, regardless of position, is a brand term in the ad copy or branded domain.

In Yahoo, branded ads also get a higher CTR, but because Yahoo is currently a standard auction for position and doesn’t take CTR into account when determining position, branded ads don’t get an effective discount. Irrelevant ads with a very low CTR (Click Index in Yahoo) are removed entirely from Yahoo’s results and system.

Rumors are swirling that Yahoo will move to a hybrid auction (similar to Google’s) in the not-too-distant future. On quarterly investor calls, Yahoo executives have hinted at this development, as well as imminent changes to the Yahoo Search PPC system to improve monetization and yield. My guess is the change will occur in the first quarter of 2006. It could be sooner, or later.

MSN’s adCenter, which launches this month, relies on a system that uses its own version of a hybrid auction. The auction factors in predicted CTR when calculating an ad’s optimal rank. In MSN, as in Google, brand advertisers with good ad creative have a built-in discount, assuring a higher average position at a lower cost than average non-branded advertisers.

When purchasing media or writing marketing plans, brand advertisers think of target customers from a demographics perspective. MSN’s adCenter will take this into account by allowing marketers to "bid boost" by age and gender. Brand marketers will love this feature. Over time, direct marketers will too, as they determine if certain age and gender combinations result in higher conversions.

It’s not yet known how MSN will factor in any CTR increases that occur due to affinities by age and gender combinations for a brand. If certain segments’ CTR increases are factored in appropriately, the MSN brand discount could be huge for brands that appropriately target.

Major brands, as well as sellers of their products and services, can take advantage of this brand discount. If you don’t sell brands and aren’t a brand in your own right (a domain people would recognize and associate with your product or service), you can always hope your competition makes some tactical or strategic errors or writes ads that are so boring and generic that even with the brand effect, your ads are more exciting and compelling.

If your competition includes brands and you aren’t a brand, you must find ways to compensate for the brand discount you don’t receive. Tactics include:

  • Better ad creative (tuned to the specific keywords searched on). This results in a higher CTR, which may put you on par with the branded competition.

  • A domain name that includes the keyword or category. Eye-scanning behavior takes in the keyword or related concepts in the domain.

  • More use of the keyword in the ad creative.

  • Going further out on the tail of keywords. You’ll capture search traffic your branded competitor may be missing. The keywords tail is less-searched keywords that are still worth buying together.

  • Raising your bid and spending the money to brand experientially. Your competition likely spent millions of dollars to build its brand in off- and online media. Perhaps spending a few thousand more in PPC search will build a brand by attracting people to your site.

  • Improving your conversion rate. If you can get your conversion rate up a couple percentage points, you can afford a higher bid. A higher bid may be required to compensate for your branded competitor’s high CTR.

Brands have clear advantages in PPC search. If you’re a brand marketer, it’s a reason to rejoice. If you aren’t, you must be smarter and more nimble to outmaneuver the brands you compete with. Of course, if you have a few million, you might consider building a brand of your own using a combination of SEM and traditional media.

Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.

ClickZ Live Toronto On the heels of a fantastic event in New York City, ClickZ Live is taking the fun and learning to Toronto, June 23-25. With over 15 years' experience delivering industry-leading events, ClickZ Live offers an action-packed, educationally-focused agenda covering all aspects of digital marketing. Early Bird Rates expire May 29. Register today and save!


Kevin Lee

Kevin Lee, Didit cofounder and executive chairman, has been an acknowledged search engine marketing expert since 1995. His years of SEM expertise provide the foundation for Didit's proprietary Maestro search campaign technology. The company's unparalleled results, custom strategies, and client growth have earned it recognition not only among marketers but also as part of the 2007 Inc 500 (No. 137) as well as three-time Deloitte's Fast 500 placement. Kevin's latest book, "Search Engine Advertising" has been widely praised.

Industry leadership includes being a founding board member of SEMPO and its first elected chairman. "The Wall St. Journal," "BusinessWeek," "The New York Times," Bloomberg, CNET, "USA Today," "San Jose Mercury News," and other press quote Kevin regularly. Kevin lectures at leading industry conferences, plus New York, Columbia, Fordham, and Pace universities. Kevin earned his MBA from the Yale School of Management in 1992 and lives in Manhattan with his wife, a New York psychologist and children.

COMMENTSCommenting policy

comments powered by Disqus

Get the ClickZ Search newsletter delivered to you. Subscribe today!



Featured White Papers

Gartner Magic Quadrant for Digital Commerce

Gartner Magic Quadrant for Digital Commerce
This Magic Quadrant examines leading digital commerce platforms that enable organizations to build digital commerce sites. These commerce platforms facilitate purchasing transactions over the Web, and support the creation and continuing development of an online relationship with a consumer.

Paid Search in the Mobile Era

Paid Search in the Mobile Era
Google reports that paid search ads are currently driving 40+ million calls per month. Cost per click is increasing, paid search budgets are growing, and mobile continues to dominate. It's time to revamp old search strategies, reimagine stale best practices, and add new layers data to your analytics.




    • SEO Specialist
      SEO Specialist (HeBS Digital) - NEW YORK                             ...
    • GREAT Campaign Project Coordinator
      GREAT Campaign Project Coordinator (British Consulate-General, New York) - New YorkThe GREAT Britain Campaign is seeking an energetic and creative...
    • Paid Search Senior Account Manager
      Paid Search Senior Account Manager (Hanapin Marketing) - BloomingtonHanapin Marketing is hiring a strategic Paid Search Senior Account Manager...