Happy 10th birthday, pay-per-click (PPC) advertising -- part 2 of 2

...Continued from yesterday (click here for yesterday's post)

It's Independence Day, the birthday of our country. But in addition to celebrating America's special day, I'm celebrating the 10th birthday of PPC advertising.

GoTo was making constant improvements to its interface and its bidding system. The company had pioneered the "search term suggestion tool" in its early days, to give advertisers an idea of which terms might be relevant to their campaigns. The GoTo tools could also give approximate counts on the number of searches being performed on any given term, which was extremely helpful for determining howmuch traffic you'd get.

Another GoTo innovation involved full disclosure. From the very beginning of GoTo's pay-per-click days, the company made advertisers' bids transparent -- not only to other advertisers, but also to search engine end users. When you did a search on GoTo, you could instantly tell how much an advertiser was bidding per click  because a note like "Cost to advertiser: $0.05" appeared next to each listing.

Despite the dot-com bust in 2000-2001, GoTo kept growing. In October 2001, the company changed its name to Overture. Through established partnerships with Yahoo! and MSN, it was distributing its paid search results to a huge number of Internet users. At one point I remember seeing Overture marketing materials that claimed the percentage reach of their PPC ads. Although I don't remember exact numbers, I recall they were quite impressive.

Although Google -- the current market leader -- launched its AdWords platform in 2000, it was started as a CPM (cost per thousand impressions) product. It wasn't until 2002 that AdWords received a major update, switching to the CPC model it uses today. Google's deal to distribute its ads through AOL was also a major milestone in 2002.  My first experience with AdWords came in 2002, shortly after the company switched to the CPC model. I remember being amazed that it had taken Google two years to make the move from CPM to CPC! This was the beginning of Google AdWords' dominance in the sponsored search market.

Overture was acquired by Yahoo! in 2003. Shortly thereafter, the Overture name was dropped in favor of Yahoo! Search Marketing.

In 2004, Google and Yahoo settled a patent lawsuit. GoTo (later Overture, then Yahoo!) owned a patent related to pay-per-click bidding. Overture sued Google for patent infringement in 2002, and the suit was finally settled out of court in 2004 after Yahoo!'s acquisition of Overture, with Google issuing 2.7 million shares of stock to Yahoo!.

Microsoft, the last of the "big three" to the PPC advertising game, launched MSN adCenter in 2006. I participated in the beta in late 2005 prior to launch, and I wasn't impressed at all. It was quite buggy during beta, with ads not displaying for me and a number of other advertisers. Since then, adCenter has seen a lot of improvements, but it still has only about a 5% market share, compared to Yahoo!'s 15% and Google's 79%.

According to eMarketer, paid search will continue to dominate online advertising for at least the next few years, near a 40% share of all online ad spending. The market is maturing, but it's still the cash cow of the Internet advertising world. The revenue from pay-per-click has fueled Google's growth, and I suspect it will continue to do so.

Happy 10th birthday, sponsored search! It's been a crazy and fun ride. But I have a feeling the ride is just getting started.

Happy 10th birthday, pay-per-click (PPC) advertising -- part 1 of 2

As we prepare for our country's 232nd birthday tomorrow, I think it's only appropriate to honor the fusion of American capitalism and the search engine.

Whether you call it pay-per-click advertising or PPC (or now that it's all grown up, does it prefer to go by the name "paid search" or "sponsored search"?), this field has grown into one of the most acclaimed, most discussed, and most closely watched barometers of Internet advertising. However, PPC advertising had humble roots, and I was fortunate enough to watch and participate in the industry from the beginning. Here's a brief look back at my experiences and observations:

Although the modern era of pay-per-click ads took place in 1998 with the launch of GoTo.com, the model was piloted by Open Text back in 1996 through its "preferred placement" listings. Open Text abandoned PPC within a matter of a few weeks though, since there was a huge user uproar. The purist Web community wasn't ready for commercialized search engine results yet.

GoTo launched in 1998 to little fanfare. Many industry gurus didn't think it would be successful, given the failure of Open Text's experiment. For example, search pioneer Danny Sullivan wrote in the March 3, 1998 issue of the Search Engine Watch e-newsletter:

"So there are many reasons why pay-for-placement makes sense. There's also a big reason against it. It just doesn’t feel right."

and

"What impact will GoTo have on the other search engines? Probably little. A quick call to representatives at Excite and Lycos found minimal interest. 'It will be interesting to see how this plays out. My feeling that the consumer wants something more cleaner than commercialism,' said Brett Bullington, Executive Vice President of Strategic and Business Development at Excite."

But for some reason, I had a feeling this paid search thing was going to be big. I remember reading the first announcement about the GoTo launch in Search Engine Watch and thinking, "Wow, this is a really great business model. I need to try this!" Maybe it was just my youthful exuberance or naïvety.

At the time I was working as the webmaster (and Internet marketing manager, and software specialist, and hardware guy) for a small automotive accessories manufacturer. I had just finished building their e-commerce site six months earlier, and I was struggling to help them grow traffic and sales. The GoTo pay-per-click model seemed like a perfect fit for the company, since it didn't require a huge capital outlay. I knew I wouldn't be able to justify a big spend with the president of the company -- after all, our $2-$3K classified ads in the back of Car and Driver and Motor Trend magazines were a huge investment for this small company that was just getting its feet wet in retail. So I knew I needed to prove a quick ROI on any programs I recommended. GoTo's PPC approach seemed to fit the bill perfectly, since it was a defined spend that could be scaled up and down based on our needs and the success of the program. Plus it would be easy to quantify. So we started small, with a plan to ramp up if it worked well.

Many people don't know this about the early days of pay-per-click, but originally there was no automated bid management system at GoTo. When the site launched, you had to send an email to GoTo with a list of the words you wanted to bid on, along with how much you were willing to spend per click. GoTo's account services team would make sure your ads met their editorial guidelines, and they'd post them within a day or two (my recollection is a little fuzzy on how long it took...but the one thing I remember was that it wasn't instant like today's PPC!). The same process would apply for changing bids -- you'd send your changes in an Excel spreadsheet via email, and they'd implement them manually.

When I placed our first bids on GoTo.com, there was nobody bidding for "auto accessories" and I think only a few companies were even bidding on "cars"! It stayed that way for a couple months. (If there were no bids or only a few bids on a search term, GoTo would display results from another search engine...Inktomi maybe?...below the paid listings to "backfill" the results.)

As GoTo started to gain traction, the company launched a bid management system -- the precursor to today's automated Google AdWords or Yahoo! Search Marketing web interfaces. GoTo's tool was rudimentary compared to today's standards, but it finally put the bidding power in the hands of the marketers. No more sending Excel spreadsheets via email to the GoTo customer service team. That's when GoTo and the PPC business model started to take flight. (Here's a Search Engine Watch article from July 1, 1998, around this time.)

About a year after GoTo's launch, the company filed for an IPO. These were the dot-com boom days, and it seemed like there were a half dozen Internet companies going public each day. I was among the lucky ones to participate in GoTo's IPO. The company did an interesting thing -- it set aside a pre-defined number of shares for each of its customers. Customers could buy up to 100 shares at $15 apiece, and of course I jumped in on the action (I would've been crazy not to!). The stock opened at $27. Within a matter of months, it rose to $70+ per share. Also, I was one of a few customers quoted in GoTo's annual report that year. I don't remember what I said that was so deserving of inclusion, but I'm sure it was brilliant. :-)

Remember, all this was happening in the days before Google. Google didn't launch pay-per-click on the current market-leading AdWords platform until years later, in 2002!

To be continued tomorrow... (click here to view next post)

Customization of online advertising creatives: follow up

A couple months ago, I wrote this blog post about Wilkes University and how it's "targeting" ads in several media to individual students the institution wants to recruit. I briefly mentioned the "Find a mortgage in insert your community name here" types of ads that you see around the Web. A few more thoughts on that topic:

• Cory Treffiletti of Catalyst:SF just wrote a brief post about ad creative auto-development, where you can get a company to personalize your ads and how they're delivered. He links to three companies that provide this service, although in slightly different ways.
  
  
• A number of advertisers and agencies outsource their design work (or perhaps "final assembly of an already designed ad" is a better way to put it) to arrive at a customized look for their ads. First they'll design an ad template or look and feel in house. Then they'll outsource the final step -- the "assembly" -- to companies in China, India, and other low-cost nations. The inexpensive workers will start with the template and will actually develop hundreds, thousands, or more GIF or Flash-based creatives that are personalized for the specific targets of your campaign. It's a much lower tech way of accomplishing the same thing, rather than dynamically inserting the information into the ad. But it's probably just as cost effective in many cases.
  

Engagement mapping: good article, and links to more information and resources

About two months ago, I blogged about Microsoft's Engagement Mapping (see post here) and how it could change the industry, since it's a more accurate representation of how online ads really work.

Here's an interesting new article about engagement mapping written in MediaPost's Online Publishing Insider. It does a nice job of breaking down a couple recent reports and white papers on the topic. The article also links to some resources on engagement mapping provided by Atlas, such as a white paper, two webcasts (one for advertisers and another for publishers), and an FAQ about engagement mapping.

Buying advertising from ad networks versus individual websites: Which is the better approach?

Online advertising networks have been around for a long time, but they've recently seen a resurgence. An increasing number of website owners are selling their inventory through ad networks now, which I think is due to several factors. Targeting on ad networks has gotten better than it used to be, social media has increased the amount of ad inventory (particularly what I'll call "non-premium inventory" because ads on social sites typically have much lower click-through rates and engagement rates), and advertisers are more likely to pursue The Long Tail of their audience.

From an advertiser's perspective, should you be running your ads on a network or should you deal with individual sites for your buy?

First of all let me say it's a complex question that depends a lot on your particular targets, the types of sites in your market, and a number of other factors. But whenever possible, I believe advertisers will get the best value for their advertising dollars by dealing directly with sites that reach their target market, rather than buying inventory from an ad network.

This is true because most site owners know their audience well, and they can make recommendations for how to reach the audience more effectively. Sure, there are lots of site owners who aren't willing to help you, might not want to give you insight into their audience, etc. But I think the majority of online publishers realize it's a win-win-win when they work closely with advertisers. Their audience is better served by seeing ads that are more relevant, the advertisers are happy because they're getting better performance, and the publisher is able to keep its advertisers happy which leads to repeat business.

For example, at IndustryWeek we see both types of advertisers: The ones who truly want to partner with us on a campaign and really care about making their campaign fit the site's audience, and also the advertisers who are buying ad inventory and applying a one-size-fits-all approach. I'm sure you'd expect to see the former group's campaign results outperforming the latter. But I'll bet you'll be shocked when I tell you how dramatic the difference can be -- it's often 10 times better! That's right...if an advertiser does a good job customizing its buy, creative approach, and watching and optimizing the campaign, they can get 1,000 click-throughs on an ad when other advertisers might only be getting 100 clicks. It's all about being relevant to the site's audience.

A lot of media buyers -- whether they're buying for their own company, or working on behalf of an agency for a client -- say that online ad networks are important because of scale. They might say, "We'd need to buy from dozens or even hundreds of individual websites, and it would be so cumbersome that it's much easier to deal with an ad network." This is certainly true, and I'm sure there are lots of advertisers who run into this situation. In many of these cases, ad networks might be the only way to effectively deploy a large-scale ad buy. But before you opt for a network buy, think about that 10x return I mentioned in the paragraph above. If you're able to get ten times the return for maybe two, three, or five times the work, often it makes financial sense to opt for the more custom, more personal relationship directly with websites -- even if it means throwing more resources (time and people) at the campaign.

Should we be producing LESS content on the web?

Scott Karp wrote a fascinating blog post about cutting down on the amount of content you produce, to avoid polluting the web. He advocates that writers reduce the amount of "stuff" they put out there, using effective linking strategies instead so as not to duplicate something that's already available on the web. His reasoning is why should you regurgitate, when a simple link will suffice?

It's something I've never thought of before. There's unlimited space on the web, right? (Ignoring things like the cost of storage, server costs, etc.) But Scott is saying there is a cost involved, and that cost is the amount of time people waste when they're trying to filter information.

It reminds me of a lot of the spam I used to get a few years ago. I haven't seen one of these in a while, but perhaps some spammers might still use this. The footer of the spam message would say,

Please Save the Planet, Save the Trees! Advertise via Email. No wasted paper! Delete with one simple keystroke! Less refuse in our Dumps! This is the new way of the new millennium.

Yes, that's true -- spammers don't waste paper to print direct mail. But countless hours of productivity are wasted each year by spam. (I'm sure someone has a study out there somewhere that quantifies how much time the average person spends weeding through spam, but honestly it's going to be such a big number that it's near meaningless anyway, so I'll conserve resources by not trying to find a link!)

So just like countless hours are wasted each year fighting spam, Scott asserts that since there's so much content out there, it's wasting people's precious time to go through it. Wow...producing less content? Can our Internet society handle such a radical idea?

So here's another way to look at it:
The answer isn't writing about less things, it's simply writing less about the same amount of things. According to Jakob Nielsen's recent column, users are reading at most 28% of the words on the average web page.

So if content creators identify the 72% of wasted words and don't write them, the problem is solved and everyone is happy! Everyone still gets to communicate, but there's no waste. Brilliant!

But like the old advertising adage goes, "I know half my advertising dollars are wasted, I just don't know which half," how will writers know which 28% of their content people are reading?

(If you haven't already figured it out, this comment is at least 28% tongue in cheek...)

Arby's super-targeted direct mail campaign? Not quite

Shortly after making this post yesterday about a college's laser-targeted mass media campaign, I started going through my mail at home. I pulled out a direct mail piece that really caught my attention.

My wife and I are both rapidly approaching our 30th birthdays. Hers is only a few weeks away, and mine isn't that far behind. So when I pulled a mailer from Arby's out of the stack and I read "Save big on my 30th birthday!", I was excited and curious at the same time. Arby's is my favorite fast food restaurant, and for a few seconds, I thought they were doing some sort of clever customized mailer to people who were hitting milestone birthdays. (Especially since targeted mass media campaigns were on my mind, after writing that blog post!)

But then I read further. It turns out Arby's Beef 'N Cheddar sandwich turns 30 this month, and they're doing a special $.30 sandwich promotion to celebrate. So much for targeted mass media.

But at least I learned something. Two of the loves of my life (Michele and Beef 'N Cheddar) were born in the same month!

Wilkes University's super-targeted ad campaigns, and can they work online?

You may have heard about Wilkes University's unconventional ad campaigns. This is the second year the Pennsylvania school is using super-targeted ads aimed at a handful of top seniors. It's placing ads like "Scranton High senior Nicole Pollock: Our goal at Wilkes University is to be as much a mentor as your mother has been. (Now, if we could only make her ravioli.)" These ads are appearing on billboards, on TV, and even on pizza boxes. See AP article here, NPR story here (audio), and one of the TV commercials embedded below (also linked here).


These are the first college advertisements I've ever seen that don't make me yawn. They're smart, they convey the intended message (Wilkes cares about getting to know you as a person), and they clearly generate a lot of buzz in the community. Of course, their effectiveness at recruiting some of the top talent to the school is just one facet of the campaign's objectives. They're meant to get those students' friends, classmates, teachers and staff, and members of the community to talk about Wilkes -- and to get this lesser-known school on many Pennsylvania seniors' short lists.

It got me thinking about customized online ads. There's the "Find a mortgage in insert your community name here" ads that you see on many sites today. Those are customized based on your IP address and other technology that helps the ad figure out your location. The first time I saw one of them, it made me say wow, but it also creeped me out in a way too. It seemed a little big brother-ish, even though the site really doesn't have any personally identifiable information about me. These types of ads aren't even in the same league as the Wilkes ads, but they came to mind first.

Then you have some of the more targeted campaigns that I've occasionally seen in the B2B world. A while back, one of my colleagues got a direct mail piece. If I remember correctly, it was in a plain, hand-addressed envelope. Inside it had an invitation that had a customized URL with his name as the subdomain (for example, http://johnsmith.xyzcompany.com). When he went to that particular URL, the page was customized with his name, our company name, and a demo or pitch for a product that was somewhat built around him. After he showed it to me, we discussed it for a while and tried to figure out how they had built the program. It seemed like the kind of campaign where they had taken a list, micro-segmented it down to a couple hundred prospects they were interested in pursuing (either that or they spent a lot of time and money to make it seem that way), set up the custom URLs which probably took a little time but I'm sure was database-driven, and then of course hand-addressed the envelopes to get the personalized factor on the outside too.

Wilkes' ads make me think about the concept of The Long Tail and how the Internet is enabling companies and organizations to pursue a niche strategy. Although Wilkes is using mass media, the university is using it in a much more targeted manner than the "photo of the three students sitting under a tree with laptops" that's prevalent in most college ads. The Wilkes approach is an interesting combination of a Long Tail strategy but in a mass media way. I have a feeling many other companies and organizations will be experimenting with this type of ad campaign soon.

Microsoft's (potentially) killer app for online advertising

If Microsoft is successful with one of its latest ventures into online ad tracking, it could end up revitalizing the entire world of brand advertising.

As Scott Karp wrote about in his Publishing 2.0 blog, Microsoft's experimental Engagement Mapping could help advertisers quantify the results of online branding ads -- what he calls the "holy grail of advertising."

Explanation via CNET:

Say a consumer sees an ad for a product in a video ad one day, and then clicks on a text ad to visit the retailer’s site the next day, and then eventually sees a banner ad that leads to a purchase. All of the monetary credit tends to go to the text link that was clicked on, says John Chandler, principal analyst for Microsoft’s Atlas ad serving division.

“Under our (Engagement Mapping) model, those will share the credit,” for example, with 40 percent each going to the video ad and the text ad and 20 percent going to the banner, he says.

Finally Microsoft might have a advertising technology that -- if it pans out -- puts the Redmond-based software giant on par with Google. What Google AdWords has done for direct response/lead generation advertising, Microsoft's Engagement Mapping could do for brand advertising.

I see this as a potentially huge development in the online ad space -- one that could help move many companies' advertising budgets back toward branding ads. During the dot-com boom, brand advertising was in fashion (remember the 600-page issues of Industry Standard and Red Herring magazines?). But after the bust and subsequent advertising recession in 2001, branding fell out of favor at many companies, replaced by lead-generation advertising that enabled easy ROI calculations. Since then, marketers have been addicted to leads because leads have been much easier to quantify than the impact of branding ads. But Microsoft's technology could change that.

Will it actually work? I have no clue. But if it does, be prepared for the next revolution in online advertising.

Keys to a successful campaign

As a media provider, my team is often asked to answer marketers' questions like, "What's your average click-through rate on [X web ad placement]?" and "How many leads do you think we'll get if we run an ad in [Y newsletter]?" When I put myself in these marketers' shoes, I completely understand what they're trying to find out. These are good questions to ask.

But probably like many other media providers, we don't answer these questions with exact numbers. Sure, we're happy to provide a range so the marketer can get a feel for how well their ad might perform. But usually we'll present it in the context of "the best ads get X percent" (or X number of conversions) and "the worst ads get Y percent" (or Y number of conversions).

The reason we offer a high/low range is simple. In most situations, either the marketer or agency is controlling the creative message for the ads. During the buying process, when they're asking these types of questions, we have no idea how good (or bad) the creative will be. Well-designed, well-written, and well-thought-out campaigns will get much better results -- independent of the medium.

Even though it covers a lot of points all of us have heard before, this article by Harry Gold of ClickZ does a good job of reminding us of the keys to a successful creative execution. Start with the message and offer, then think about the landing page, and follow through to the post-action phase like confirmation pages and confirmation emails. Every step matters. Good ad creative can't overcome a bad landing page. A good landing page is useless if the creative message is wrong. And if a strong follow-up isn't in place, you're throwing away perfectly good opportunities.

One thing I'd like to add to Harry's article: Don't forget about what comes after these steps too. How will you nurture these leads? What's your sales team's approach for following up, taking the prospect through the sales cycle, and closing the sale? Often these tasks are not our job as marketers -- since this responsibility is passed along to sales in many companies. But if there's not a seamless plan in place, you know what happens. Leads and opportunities are lost, even if you did your job developing a successful advertising or marketing campaign.

Lead-obsessed marketers and the same-day wedding

I just saw this white paper entitled "Blind Date to White Wedding: Best Practices for Lead Nurturing that creates B2B relationships, builds trust and increases sales," (hat tip to Tom Pick) and it made me think about a play I saw a few weeks ago. Yes, I'm going somewhere with this...

For the first time in more than 10 years, I went back to my high school alma mater. My wife and I went to see a series of one-act plays (we knew one of the performers: great job, Brielle!). One of the plays was called "Wanted: One Groom," and the basic premise was that the main character, a young woman named Kayla, wanted to get married -- so she placed an ad for a groom in the New York Times. The ad included her address, the date and time of the wedding (later that day!), and asked prospective grooms to apply in person immediately.

When Kayla's best friend heard about the ad, she thought the idea was completely absurd, and spent the entire play trying to persuade Kayla and her parents how crazy it was to get married the same day, to a total stranger who was found through a newspaper ad. But the friend's complaints fell on deaf ears, because Kayla and her parents thought it made perfect sense.

It amazes me how many marketers spend their budgets entirely on lead-generation campaigns. I talk with more and more advertisers whose sole purpose is driving leads. If the marketing effort doesn't have some sort of lead-gen component that identifies prospects who are ready to buy, their boss or their management won't let them do it. So let's go back to the "Blind Date to White Wedding" white paper, and think about the purchase process as a courtship between marketers and their prospects...

These short-sighted marketers see lead-generation as a way to cut to the chase. They think, "Why should we bother with identifying someone who isn't ready to buy immediately, and take the time to nurture these people...when we can just go after people who are ready to buy right now?" The lead-obsessed marketer is just like Kayla in the play who wanted to find a groom without going through the process of dating, steady relationship, and engagement. They want to skip the "courtship process" and just place an ad for someone who's ready to buy their product.

Just like the best friend in the play who thought an ad for a groom was absurd, I'm saying that marketers who are solely dependent on generating ready-to-buy leads are equally absurd! (But just like in the play, I have a feeling my complaints will fall on deaf ears as well.)

That's not how marketing is supposed to work. Of course you want to identify people who are close to purchasing your product or service, but that shouldn't be the only group you're after. Marketers should be developing a pipeline of potential customers through many different sources, in all stages of the buying process. The ones who aren't ready yet should be "courted" or "wooed" until they're ready...and only then is it time for a wedding!

When someone else messes up your perfectly-crafted work

In this post by Dianna Huff, she discusses the difficult situation marketers face when they have a boss rewriting their copy, often making it worse.

While I try not to press myself too closely into the inner workings of our clients' communications, I can usually tell when an ad was created by a boss or a committee of managers -- rather than by an intelligent copywriter who has an eye on results.

It's always wonderful to see the great performance a campaign that's well-crafted and "unfooled-around-with" (to steal the slogan of Simply Orange brand orange juice) can yield. But when someone in the process feels like they need to include "this is why our company is so great" wording, or they lose sight of the customer's desires and objectives, the results can be disastrous. I've seen click-through rates that have differed by a factor of 25 (yes, 25 times better!) when one well-written ad runs in the same medium as a poorly-written ad.

Aside from Dianna's suggestion of printing out that article and leaving it on your boss's chair, I'd simply recommend pushing back (delicately, of course). If you're dealing with a medium that's measurable, like most online ad campaigns, suggest some testing to see which ads perform best. Remind your boss to put themself in the prospective buyer's place (maybe using the personas you've developed). Sometimes it just takes a small nudge to make them remember the basics and snap out of their short-sightedness.

Social media versus advertising in an economic downturn

This post by Josh Bernoff predicts that social media will be the choice of marketers during the economic downturn. He advocates cutting traditional advertising when budgets get tight, and moving your money to social media because it’s in a different part of the purchase process — consideration (versus awareness with traditional ads).

I agree that social media should be an increasingly important tool in a marketer’s toolbox. But social media’s use really depends on what you’re trying to accomplish. Social media, search ads, and email marketing can be great and relatively inexpensive tools for your marketing, but there are many situations where there’s no substitute for awareness.

For example, I’ve been working with a client who is an innovator in a brand new product category. This client is a large established company, but the particular breed of technology they’re talking about is relatively new to the market. Manufacturers simply don’t know about it yet.

Would social media be a good choice for this company? Not at this stage. They’re still in their infancy — where potential customers don’t know anything about the solution…and the customers don’t even know they HAVE a problem! With social media, they’d end up preaching to the choir — a tiny group of people who already know about this new solution and think it’s great. But without a loud voice (read: advertising) to educate the market about the problem, this company would be missing the critical mass they desperately need. Social media can’t do that on a large scale nearly as effectively and reliably as advertising can.

Awareness is critical to many marketing campaigns. Social media can be very useful, but don’t make the mistake of throwing away your advertising campaigns for applications where social media isn’t warranted.