Allocating Budgets for SEM and Display

I was recently asked to provide a rule of thumb for media allocation between online display media and paid search media. The specific question was how to allocate a specific fixed budget across display media and PPC (define) search, but the media allocation problem arises even in an open-budget direct response campaign where the budget can grow as long as target cost per action/opportunity or return on investment/advertising spend metrics are met.

Among our clients, we’ve seen everything from a 100 percent search budget to an 80 percent display budget. Whether you buy premium or remnant/exchange media will also factor in.

Unfortunately, there is no definitive rule of thumb for media allocation within online media, nor is there a perfect, easy allocation system across media (both online and offline). The right answer will differ dramatically from industry to industry based on several factors. Even within a particular industry, the best allocation may vary dramatically based on the specific advertiser/marketer and that person’s objectives.

If you undertake this kind of allocation task, first find out whether display media and search media share the same metrics and objectives. The obvious objective for all media and advertising is more sales and higher-profit sales (due to brand impact or simply product mix).

I’m reminded of a media director’s wise words: “At the right price, I’ll buy any media.” The last touch point can’t be given all the credit for a purchase or lead.

The optimal, holistic way to determine budget allocation is to tie everything back from the sale, not just to the last touch point but also any material influencers along the way.

People throw around the word “engagement” when it comes to measuring advertising impact, but influence is all that matters. Either you’ve influenced a purchaser or influenced an influencer. Branding metrics were devised as a way to attempt to quantify influence in attitude or planned behavior.

But because influence is hard to measure, instead you might use some form of a direct response proxy that is likely to correlate highly with influence. Leads or orders are possible in some businesses, while others need to rely on a scored stickiness metric that attempts to accurately gauge how interested the visitor is in the site’s content.

The active assumption here is that familiarity with the products or services increases influence. There’s often a delicate balance between driving influence and awareness, and harvesting demand. Display and search can be used to achieve direct response and influencing objectives.

Regardless of how you allocate budget between display and PPC search, your goal is an objectives-driven approach that recognizes the media interaction effects between display and search as well as the lagged assists that search might provide in stimulating later search or direct navigation behavior. Let the data and numbers guide your as you make ongoing adjustments.

Ready? Pick a ratio and get started. First, though, some things to keep in mind that may dramatically influence where you end up:

• Selected metrics and objectives. Search is great at harvesting demand. If someone else creates the demand and you can harvest that preexisting demand, it’s hard to beat search (paid or organic). Of course, you may need to be the organization creating the demand and harvesting it, which will result in a more balanced mix.
• Competitive density and aggressiveness. If you have a lot of competitors (or even a small number of ambitious competitors) and their budgets are set aggressively, PPC search may be unaffordable given your allowable metrics. The auction pressure on prices may offset the great conversion attributes of the search clickstream. The level of competition is something you’ll only learn once your campaign is deployed. Competition may also behave differently at different average positions. This is a concept called price elasticity.
• Where you buy display media and the prices you pay. Just as with search, not all display media is created equal. Some display media looks more like search media than anything else, particularly search retargeting. You’ll need to refine your display media choices and creative just as you would with your PPC account to optimize your spend within that silo.
• Your product/service offering. Some products and services don’t lend themselves to search as much as they do to graphical media. Creating awareness and demand in these instances is more difficult, and in some cases much more difficult, than using search alone. So display and other forms of media and marketing are required, including PR, social media, and perhaps even (gasp!) offline media.
• Budget level. It’s hard to justify having a display media campaign at all for budgets under a several hundred thousand a year. The levels of human resources required to continuously test and refine a media campaign are, in some cases, even higher than those required by PPC search campaigns. If you only have a small budget, perhaps you shouldn’t consider display media. Even the new ad template systems offered by Google and available in other places require a certain level of skill and ongoing TLC.

Search and display media can play very nicely together, particularly when measured and managed in tandem for interaction effects. If your products or services would benefit from a mixed budget, by all means engage in both search and display. Of course, a great way to enter display media without straying too far from search is with behavioral search retargeting.

Large-scale search programs face complex challenges to operate as effectively as possible. Join us on Wednesday, September 9, 2009, at 1 p.m., for a free Webinar, “Effectively Managing a Large Scale Search Program,” for tips and techniques to wrangle the most complex of programs.