When to Spend More on PPC

At the recent Search Engine Strategies in Toronto, budgeting and the competitive landscape continued to be discussed. Pay-per-click (PPC) auctions are increasingly competitive, prompting marketers to ask whether they’re spending enough.

Google and Yahoo reps provide competitive spending data to encourage you to increase spending. They also send newsletters touting search traffic’s value. Sometimes the reps are right, and sometimes the newsletters do provide a compelling reason to spend more on PPC. Yet sometimes you already spend enough on search engine marketing (SEM). Moreover, there are different ways to increase spending, including:

• Raising bids
• Raising CTR (define) on existing listings
• Adding keywords
• Adding engines
• Changing match types
• Turning contextual traffic options on (if they’re currently off)

When deciding whether you should increase a search budget, you must take several factors into account. I’ll review these below, as well as discuss how and when to reevaluate spending based on these factors.

Any Search Engines Missing?

I’m often surprised to learn a marketer is using only one search engine. Sometimes it’s Yahoo, sometimes it’s Google. Missing an engine is a huge opportunity cost. By not listing in an engine, you miss profitable campaign segments you could be running.

Even if you must split a budget in some fashion, you’re better off allocating budget across engines instead of within just one. If you’re a big search spender, consider MSN’s Search Featured Sites (SFS) listings. MSN has announced in the future, smaller advertisers will be able to buy directly from MSN. For many marketers, second-tier search engines are a good fit. FindWhat.com, Kanoodle, LookSmart, Enhance, Mamma, and many others might be right for you.

Competitive Landscape, Competitive Response, and Price Elasticity

Why bid more on a basket of keywords if the competition always escalate bids into a war? If the competition responds to each of your actions, search engines are the only winners. You won’t get much incremental traffic, and costs increase while return on investment (ROI) drops.

In some of the most competitive industries, the engines’ sales teams shuttle between competitors, getting each to escalate bids and spend more. They know this will continue until one gives up. When the reps try to sell more inventory, recognize it’s already been purchased by your competition. You buy their position (for the time being, at least). Before escalating bids to increase spending, test the market for elasticity (level of competitive response).

Power Keywords With High ROI

If you could buy more of the very best traffic (the highest conversion clicks at reasonable prices) for a PPC search campaign, you’d likely opt for it. When you have power keywords (high-traffic keywords with good ROI), the easiest way to spend more wisely is to get a higher CTR on ads and keywords that already work.

There are only a fixed number of searches for each and every keyword phrase each day. This fixed resource is limited by searches, not clicks. If you can get your CTR up without click quality degrading, you find gold. In Google, because the AdRank algorithm factors in CTR, a higher CTR often results in a higher position at no additional cost or the current position at a lower cost. That’s win-win.

Other Media

Search is part of a bigger marketing strategy. It’s unlikely to be the only medium you buy. Consider campaigns holistically. Though there are interaction effects between media, particularly media driving search behavior, most marketers don’t have access to media allocation models that account for interaction or multiplier effects. So the best strategy is to buy the most efficient media first. If SEM outperforms other media, you’re overspending on other media and under-spending on search. Allocate each media plan dollar where it works hardest.

The reality is some media just aren’t measurable. Use the data you do have to make an educated guess.

Take a good look at your campaign. You’ll probably find you don’t spend enough on search. Customers are looking for you. When they search, do they find your competitors? Make sure you’re there, too.

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