Budgeting PPC for ’07

In ad agencies and marketing departments across the globe, media plans for 2007 are taking shape. Problem is, planning media spending a year in advance doesn’t work for search and auction-based media.

Media plans can’t possibly take into account some of the factors that are unique to SEM and other auction-based media. Search inventory is unpredictable and seasonal. Contextual and behavioral inventory availability changes, search engines are adding new levels of targetability, and PPC pricing in your competitive set is guaranteed to change. Any pre-budgeting decisions you are making right now for 2007 will be wrong. Chances are you’re making some major strategic and estimating mistakes in your 2007 media plan for PPC search. If you, and perhaps your agency, are almost done with the media plan and have finished budgeting PPC search and contextual spending for next year, you may want to take a closer look before approving it. Next year you’ll need a flexible, fluid plan, not an inflexible locked-in one.

Why You Need To Keep Budget Allocations Fluid

Search engine impression inventory is based on user behavior. The more searchers there are, the more impressions and clicks. On top of the normal seasonality for each industry, much search behavior will be driven by other advertising and PR. Your competitors’ advertising and marketing may also generate a search response from which you can benefit. If you’re not managing PPC using a fluid allocation of budget, you’ll either under- or over-spend, or spend on the wrong clicks.

Search engines are getting more non-search inventory daily and providing the opportunity to better target that additional inventory. Contextual inventory has been around for a while. Many of you are currently probably opted-out of the content networks, but that may come to be a mistake. There are some great sites in the engines’ content networks, and even if the network as a whole isn’t a great fit for you, the search engines are starting to provide better control over the networks’ contextual sites. Behaviorally targeting searchers as they navigate the Web is likely to expand dramatically in 2007, but no one knows how much inventory the engines and networks will make available to search marketers who want to re-engage with searchers through text- or image-based advertising.

Engines may change their PPC formulae. Google has changed the way they calculate AdRank over the last year or so. Your bid landscape may be dramatically impacted by changes in Google’s quality score formula,. Similarly, Yahoo is readying the “Panama” update which will move Yahoo from a traditional auction to a hybrid auction. The impact of formulaic changes is impossible to predict. Having the strongest relevant ad creative and landing page will always be a best practice. In some cases, you may need to re-allocate media dollars to site development and creative testing.

Beyond Search

As Google and the other engines get into additional media types (such as Google Radio and Google Broadcast), you’ll need to determine how to test these media opportunities alongside search. If your organization’s search budgets are siloed away from other media, you aren’t alone. But with engines getting into on- and offline media, and media interaction effects in play, you must coordinate budgets across media and be aware of the entire marketing and promotional plan. A fluid marketing campaign allows you to tap opportunities as they become apparent.

But I Need a PPC Spend Placeholder in My Media Plan

Media plans won’t disappear any time soon. The VP of marketing and the CFO still want a media plan for most ad spending. Allocations must drill down to media type, even the media vendor in most cases. In 2007, your media plan should have more flexible insertion order terms than ever before. Negotiate the most liberal out-clauses you can get. Offline media in particular are hungry for dollars as their viewership/readership drops.

Media Interaction Effects (Search Can Help Measure Offline Media)

A smart media plan has some pulsation in the flights that will run in order to use search responsiveness as a media success metric while buying search media. So the more effective a media buy is in generating user response, the more budget you’ll need to allocate to PPC search, particularly on brand keywords and power keywords. If you spend heavily on some localized media (geographies), or on certain days or in certain dayparts, search impression and click data may actually tell you what media drives response (a search response, at least).

Media Plans Are Living Documents

Think of your media plan as a living document. No one channel is sacred. Be willing to move budgets around to optimize total effectiveness. Search will likely be a critical piece of your integrated media plan once you get used to changing insertion order caps regularly. Today, media opportunities are popping up as fast as consumers change their behavior. If you’re not nimble and flexible enough to roll with the punches (and throw some punches of your own), you’re sure to be knocked out.

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