SEM Performance Evaluation – Think Twice Before Calling It a Game

The economic turmoil in the past two years may have been a blessing for many digital marketers who have tried year after year to convince clients to experiment new online digital advertising channels beyond the standard display ads. Paid search advertising across major search engines became the next big thing at the beginning of this year, when many marketers in Asia started experimenting it as a new online advertising channel.

Now, as the year comes to an end, the novelty dies off and they are taking a harder look at the performance of their campaigns to determine whether and how much they should invest in paid search next year. I came across many marketers in the last two months telling me they were disappointed in their paid search performance, and seriously considering whether to invest in it again.

As a search practitioner, I couldn’t help asking them to let me have a look at one of their past campaigns to figure out what possibly went wrong. To my surprise, my findings are resoundingly common. They have so many KPIs for their paid search advertising and no basic “targeting” strategies have been used. In return, nothing gets achieved because the campaign lacks a strategic focus.

In this column, I will provide you with some insights to define the right success metric for your search advertising.

One of the beauties of many search advertising platforms is the ability to target an extensive geographic area (entire country or world) with one campaign, or even with the same set of keywords and ad copies. This sounds like a very tempting idea because you can now open up your service or product offerings to the most remote corner of the world without putting in much effort. However, this convenience is also the pitfall of many paid search advertising. To right the wrongs, let’s start by identifying onekey performance indicator (KPI) of your paid search investment.

Paid search advertising, together with proper tracking, can provide you with a wealth of data at a very granular keyword level, such as the number of impressions, the number of clicks, the cost per click, the click-through-rate (CTR), and even time on your site, bounce rate, cost per order/booking/lead (CPA/CPL), total revenue, and the return on advertising spend (ROAS). While each element is partially correlated either positively or negatively with one another, it is important for marketers to identify one particular metric as KPI so that the campaign can be optimised accordingly. It is highly unlikely that you can win all in your paid search advertising. Let’s not forget that paid search advertisers are usually being charged on a cost per click (CPC) basis.

If your KPI is CPL/CPA, you may want to invest heavily in markets that generate a lot of bookings or leads, regardless of the revenue that each lead can bring. For example, promoting your hotel rooms in short haul markets may help you generate a lot of bookings, leading to a low CPA. However, the number of room-night per booking is relatively small, which leads to a lower ROAS. On the contrary, if you promote your hotel rooms in long haul markets, you may end up having a high CPA but also a very high ROAS. The same theory can be applied to almost every campaign, even for the B2B ones. A lead from a U.S. or Europe buyer for a B2B portal tends to be of higher “quality” than a local lead, because the potential trade volume associated with it is a lot more significant. However, its CPC and CPL/CPA are likely to be higher because of the bidding competition across multiple advertisers in the U.S or Europe. In short, marketers need to make a strategic decision about using one of the metrics as their primary KPI.

Figuring out your primary KPI will set you on a solid foundation to evaluate your paid search performance. However, since no one has an infinite budget to run their search campaign, it is important to identify the pattern and trend of your campaign performance across different search engines so that you can set up a proper structure (account vs. campaign vs. ad group in each search engine advertising platform) and assign an appropriate budget for each.

One of the most common mistakes I have seen is that many advertisers use a single search advertising campaign (with the same set of keywords and ad copies) to target the entire country or even the entire world, set the same daily budget throughout each day of the week, and fail to make use of dayparting. The overall performance, as you can imagine, is quite disappointing.

Variation in transaction and revenue percentage throughout the day of week

Believe it or not, the basic four Ps of marketing (price, product, place, and promotion) are still applicable when you design and run online search advertising. Just like a physical store, you need to identify where to set up your shop (Place: your geo-targeting/daypart setting), what you should be selling (Product: your keyword set), how much you sell your product (Price: your product/service price and the bid price for your keywords), Promotion (what the unique selling points (USPs) should be in each market and highlight them in your ad copies). I will discuss this in more detail in my next column.

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