Ten Reasons You’ll Soon Spend 25% More On Search

If you have a successful, profitable online business or an offline business that gets its leads from online sources, I’m confident you’ll be spending 25 percent more on paid search within the next year. Not every marketer will, but the stronger ones will.

If you are like my clients and those of most agencies I’ve spoken to, chances are that your budget has been on a roller-coaster ride this past year. Sometimes it seems as if half of the advertisers have dramatically increased budgets and half have cut fairly significantly. Reasons for budget cuts are as unique as the businesses and industries involved. But the advertisers who raised (or even more than doubled) their paid search budgets have a common vision that search marketing will allow them to build their businesses effectively, efficiently, and profitably. It’s amazing how few advertisers (on a percentage basis) are spending within 10 percent of what they spent last year. It’s likely that this volatility will continue. However, for marketers with resources to fund PPC (define) search budgets delivering demonstrable profit and ROI, the budgets will be made available. Even in cases where inventory constraints would seem to limit spending, many marketers will find themselves able to spend anyway.

Here are 10 reasons you’ll likely find yourself spending 25 percent more on search engine advertising over the next 12 months.

Search Engines Adjusting Their SERPs

Google’s recent shift of the right rail ads closer to the organic results within the overall SERP (define) are the tip of the iceberg. As the engines evolve, they will play with changes to color, backgrounds, and placement of ads in order to make the ads look fresh, different, and relevant. CTRs (define) will increase and therefore you’ll pay more if your budget supports it. If those clicks were profitable at a 1.6 percent CTR at position 3, then they should be equally profitable at a CTR of 1.9 percent. It’s just a matter of deciding you want the extra clicks and making sure your budget settings let you purchase the profitable clicks.

Better Relevance Engines

There are billions of searches for which it is difficult for the search engines to pick the right ad from thousands of possible matches with diverse match types, domains, and bids. All the search engines are working on how best to select a relevant ad for complex queries or queries for which there is no exact match bidder. For example, imagine how many ads within a shoe store advertiser or across all shoe sellers would possibly be relevant for the search query “men’s size 12 extra wide leather steel-toe waterproof work boots.” Picking the most relevant ad is critical because irrelevant ads are far less likely to get clicked on. Also, imagine whether an ad for a retailer with a heavy retail footprint in a particular region might be expected to get a higher CTR and therefore be more relevant for searchers within that area. While B&H Photo and J&R Music World sell nationally and even internationally, their brands are better known within a radius of New York City. Therefore, the search engines may learn that a search query for an “LCD flat screen TV” originating from the NYC area might justify a higher relevance (or quality) score. Expect your ads to get served in more relevant SERPS, resulting in higher CTRs.

You and Your Competitors Are Improving Ads and Campaign Structures

The search engines use a carrot-and-stick approach to motivate advertisers and their agencies to improve campaign structure, ad copy, landing pages, and even load time. These all add up to higher CTRs (or in some cases higher conversion rates) which result in higher reserve prices on CPCs (define).

Keyword Price Escalation

Yes, some sectors saw a drop in CPCs, but every indication is that CPCs will continue to rise as advertisers improve conversion rates and start to factor in the more difficult to measure benefits of search engine advertising (including its influence over later purchases and lift in branding metrics).

Changes in Consumer Search Behavior

Several research vendors and studies have reported that consumers are searching more often. This behavior generates additional search query volume. Consumers may also be learning when the sponsored links are relevant.

Expansion of the Definition of Paid Search

If your site gets hundreds of thousands of organic and paid search visitors you will likely move into search retargeting sometime soon if you haven’t already. If you are already doing search retargeting, you may start using more than one vendor in an attempt to find the best mix of ROI and scale.

Conversion Rate Improvements

As mentioned earlier, if you improve conversion rates, your reserve price per click goes up. Sometimes you’ll spend that reserve price; other times you’ll let the extra profit fall to the bottom line. Understanding and constantly retesting the elasticity of your marketplace will become key here.

Graphical and Rich-Media Enhances PPC SERP Elements

We’ve seen it with movie trailers and Google, Yahoo, and Bing are all experimenting with a form of universal search for paid ads involving the intermingling of graphics or rich media into the SERP on a paid basis. Expect the CTR to go up when anything from a logo gleam/favicon all the way to a full product shot are introduced into the SERP.

The Economic Recovery

If we have an economic recovery, people will search more and buy more online.

The Search Engine Wars

As Microsoft heats up the war with Google, it may actually lift the category of search along with promoting trials of its own product.

So, if you have a strong business and want to build it into an even stronger business using search, expect to have to shell out more over the next year, whether you like it or not.

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