WHITE PAPER. The evolution of Pay-Per Click CMO SERIES 1ST IN A SERIES OF TWO ON THE EVOLUTION OF SEO, PAY-PER CLICK & DISPLAY ADVERTISING

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1 12 PAPER CMO SERIES The evolution of Pay-Per Click 1ST IN A SERIES OF TWO ON THE EVOLUTION OF SEO, PAY-PER CLICK & DISPLAY ADVERTISING Why read this paper? Pay per click (PPC) advertising has evolved over the years into a combination of old and new. While many of the basic concepts of PPC advertising remain the same, new concepts have mixed some of the older ones to create an entirely new entity. In addition, the overall concept of PPC marketing has changed, so advertisers have had to change their entire approach. This whitepaper is interesting since it highlights the way PPC has evolved over the years to where we are today. Benefits of PPC campaigns Easy to target specific audience Pay only for performance Easy to measure results To t a l c o n t r o l o v e r c a m p a i g n 1

2 Life Before PPC Believe or not there was a time before the Internet and digital marketing. In fact, the practice of online marketing is just a few decades old. The first ever bulk commercial marketing message was an sent to 600 ARPANET users back in The message advertised Digital Equipment Corporation (DEC) computers, and the use of ARPANET resources to send such a bulk mail was not appreciated. It took several years for digital marketing to become mainstream. Today, reputable website owners use less intrusive techniques such as pay-per-click (PPC) marketing to get their messages across. Such paid-on-results marketing techniques are now embedded in the culture of digital marketing, but that hasn t always been the case. Before Google AdWords took off, advertisers paid per impression, thinking that a view of an advertisement on a website was worth the same as a view of a magazine page or a physical billboard. It didn t take long for companies to notice the phenomenon of ad blindness. It s not so hard to generate tens of thousands of impressions on your ads, but it s much more difficult to turn those impressions into clicks. The Early Days Of PPC Marketing The first company to try PPC on a large scale was Planet Oasis, a web directory. Planet Oasis launched a PPC system for listings in its directory back in PPC, as an online marketing model started back in 1998 by Omniture, currently owned by Yahoo. The Google Revolution Google AdWords revolutionized online marketing and its companion system, AdSense, which allows webmasters of all kinds from hobbyists to full-time marketers to monetize their sites. The AdWords service has come a long way since those early days. The first releases of AdWords had little in the way of anti-spam regulations and did not use the Quality Score system. It took several years for Google to add features that paid search professionals take for granted today, such as conversion tracking and the keyword tool. Over the years, there have been some hiccups. Last year, Google made tweaks to the AdWords algorithm. The changes led to some marketer s campaigns getting disabled because of low CTRs (Click Through Rates), even though those campaigns were highly targeted and usually converted well. Some marketers accused the company of trying to be too clever for its own good. Despite those problems, however, AdWords continued to grow as a platform. Today, Google AdWords is a powerful force in the world of online marketing, being worth more than $38 billion. Features such as ad extensions and site links allow marketers to make more eye-catching and useful ads with extra links and contact details included. The analytics feature offered is second to none; and the sheer number of people who can be reached by AdWords makes it perhaps the most important advertising platform on the Internet. However, it wasn t until search giant Google decided to implement paid search in 1999 that the concept started to take off. In the year 2000, the company launched the system that we now know as AdWords. The model was real simple, provide relevant results based on the users search terms. It created an ecosystem, which carved the path of advertising in a modern way over the Internet. True PPC really started in 2002, because before that advertisers were charged based on cost per 1,000 impressions. Now PPC is modeling in a real-time auction. 2

3 The Engine That Drives PPC Ad Ranking It wasn t all that long ago that almost all PPC search engines (PPCSEs) had one single, fundamental commonality: the highest bidder achieved the highest ranking in the search results. Typically, the advertiser bidding the highest cost per click (CPC) would gain the top spot within the search results. While some PPCSEs still work this way, most now function quite differently. Today, most PPCSEs use a combination of factors to determine ad rankings within their search results. Bid price is only one element factored in the equation, so bidding the highest dollar amount does not necessarily ensure top ranking. Quality Score: Quality score determines the overall placement of an ad for pay-per-click campaigns at the search engines. While the Quality Score is an undisclosed algorithm from the search engines, the following factors are known to achieve a successful campaign. Bids-It is essential to setup aggressive bids within the market for branding efforts in order to achieve top page positions. Visibility is crucial in PPC campaigns; second page positions will cause conversion rates to plummet in performance. Historical Data-Campaigns with good historical performance often receive higher quality scores due to credibility with the search engines. CTR-The ad copy works as a gate keeper, bringing in relevant users while deterring irrelevant users as well. The CTR is calculated based upon this notion; a higher performing ad receives a higher CTR, thus attributing to higher quality score. Competition-The more saturated a market it is the more difficult it is to gain high page positions. Various page position and ad copy testing can be implemented to combat this issue. Relevancy-It is essential that keywords, ad copy, and landing pages are relevant to one another in order for users to have a quality experience at the search engines. With the proper account structure and continuous optimization one can achieve a successful pay-per-click campaign. Overall, the higher the quality scores within a campaign, the better the success rate. Relevance is key, which allows for lower CPCs and higher page positions which typically leads to higher conversion rates. Bid Price: At first glance, bidding seems pretty basic. But the evolution of PPC brought changes in bidding along with everything else. Gone are the days of setting one bid price for 900 keywords and forgetting about it. Now, advertisers can not only bid separate amounts on each keyword, but they can also assign more than one bid on each keyword, depending on where the ad for that keyword will be shown. In addition, advertisers on some PPCSEs can now assign different bid amounts for different times day parts. If an advertiser knows that more sales for his product typically occur during 1:00 pm and 3:00 pm on weekdays, he may be able to assign a higher bid price for that time period, Monday through Friday. Advertisers must invest the time in fully understanding all of the bidding tools available to help them manage each PPCSE that they use to run ad campaigns. Understanding and using these tools can definitely result in a higher ROI. 3

4 Click-Through Rate: Relevance is key. Obtaining a high CTR is probably the single most important part of any PPC marketing campaign. That said, writing fresh, unique and concise ad copy is probably the single most important task a PPC marketer can spend time on. Best Practices For Great Ad Copy: Historical Data: Know the product you are marketing Test multiple ads; a small change in ad copy can make a huge difference Be current; stale ad copy is worthless Be unique; say it in a new way Don t copy ad copy; make sure it s original While older ads can occasionally achieve higher rankings in search results, it s never too late to start competing against older ads. Just be aware that it may take some time and patience to compete fully with older advertisers. Competition: Know the competition and be aware of what they are doing and what they aren t doing. The Future: PPC advertising is still evolving. It s important to stay up to date on the latest updates and changes to the industry as a whole. Change is inevitable just be ready to adapt quickly. Online advertisement using PPC models is no longer limited to search engines but also includes search networks, content networks and even image networks. 4

5 Sq1: The Customer Engagement & Conversion Optimization Agency About the author Judge Graham, President It s fitting that Judge became president of Sq1, as he has been at the leading entrepreneurial edge of digital his entire career. Before joining Sq1, he was co-founder and CEO of one of the most successful digital agencies in Texas. Judge helped his digital agency grow its client roster to include such notable companies as American Airlines, Mountain Dew, Pier 1 Imports, Dillard s and Radio Shack. The youngest recipient of Comdex s Small Business of the Year award, (one of the largest trade shows and computer expos in the world), Judge has been a leader in digital marketing/performance media, user experience and web design and development for well over a decade. He holds a bachelors degree in Business Administration from Texas Christian University with an emphasis in e-business. Sq1 continually engages customers along the entire consumer lifecycle and purchase funnel, using conversion optimization to drive higher sales at a lower cost. Our customer-centric approach applies data and analytics to every interaction helping our clients maximize customer profitability and optimize customer experiences. Designed to adapt with our clients ever-changing consumer base, we take the guesswork out of marketing. Our repeatable programs integrate all channels and media to steer consumers along the path to purchase pre and post leading to predictive ROI modeling. While traditional conversion optimization measures only one phase of the conversion process, we measure each and every consumer touchpoint to determine the best way to maximize marketing spend. Every single program is viewed as an opportunity to test, learn and optimize. Using multivariate and A/B testing, we continually scrutinize a variety of factors including: landing page effectiveness, messaging, and targeting methodologies. We take full advantage of the latest in technology, message delivery and measurement. Our Optimization Science Engineers design our programs, focusing on predictive modeling, ROI, and monitor results in real time, making changes to campaigns whenever necessary all while the campaigns are live. We are a privately-held corporation with offices in Dallas, Houston and Portland. For more information, contact Sq1 at or visit 5