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)

Disorganized marketing data is as good as no data at all

As marketers, we play in big pools of data every day. We're renting lists, sorting and filtering databases of leads, and going through mounds of statistics to look for trends. That's great -- when the data is accurate, filtered and tagged properly, and the way it should be.

But do we take for granted that our data is good? This can be very dangerous. If you're renting a list and the list vendor hasn't done a good job of verifying the data and organizing it properly, you could end up reaching a lot of people you didn't want to reach.

Here's a great example. The other day I read a press release by Jigsaw, a site that's a cross between a list broker and a social network. (In case you're not familiar with Jigsaw, you can essentially buy, sell, and trade business contact information. It's billed as a great resource for sales professionals who need a constant stream of accurate leads.) Jigsaw's press release announced that it will begin providing all its company data -- company names, addresses, industry, number of employees, etc. -- for free. The hook, of course, is that you still need to pay for contact info for particular people within those companies. You can also license this data for use in your own applications, on your own website, etc.

This caught my eye because the media property I work for, IndustryWeek, is always looking for new ways to provide useful and relevant information to our manufacturing executive audience. I thought a licensing deal with Jigsaw might be worth looking into, if we could help connect manufacturing decision-makers with information about companies they need to know.

So I started digging deeper. I went to Jigsaw's Open Data Initiative pages, to a list of pre-defined filters they've already developed for the data. I was pleased to see a category and several sub-categories for manufacturing, which is exactly what I was looking for. So I decided to check it out. I clicked on the "Aerospace & Defense" sub-category, and the first few company names looked appealing. These all look like companies that are in the aerospace or defense business.

But then I scrolled down the page. I started noticing something disturbing. There were a lot of listings for martial arts studios. Wait a second: martial arts studios aren't manufacturers! It took a few seconds before I figured out what was happening. Their filter must be finding the word "defense" in the listings for karate studios, which of course is getting matched up with "aerospace and defense."

I thought maybe I just picked a fluke category, and most of the data here is good. So I tried the next sub-industry filter in the list, "Automobiles, Boats and Motor Vehicles." Again, the first few seemed good. But then I started seeing listings for "Funday Eco-Tours" and "Go Fish Charters." Again, these companies might be associated with boats, but they have nothing to do with manufacturing.

I'm saying this not to fault Jigsaw. I've played around with their site in the past, and I found it to be pretty good. The business model makes sense, although I can't say anything for the accuracy of the information because I've never checked it out personally. My larger point is that when you're given a data source, you should always ask questions like:

• How was this data collected?
• How were the filters/groupings/categories applied? For example, for a magazine circulation form, I'd ask if individual respondents put themselves into an industry grouping, if the publisher added the grouping based on the name of the company, or if it was done some other way.
• How fresh is the data?
• Was there any human intervention in the data collection process? In other words, did an expert review responses for plausibility? If it's numerical data, was it scrubbed to remove outliers?
  

As the world becomes more dependent on databases, we hear an increasing number of horror stories about data gone wrong (the TSA's "Do Not Fly" list comes to mind, where some people have been mistakenly placed on the list and go through a huge ordeal every time they need to board a plane). Don't let your marketing program become a victim of bad or improperly used data.

Lock up your web forms: Google has started indexing the "invisible web"!

Webmasters and web marketing managers should be sure to read a recent post in the Google Webmaster Central blog. Google is beginning to submit web forms in an effort to find additional content that resides behind them.

It's part of Google's effort to index the "invisible web" -- pages that aren't currently being spidered by the Googlebot. Up until now, when the Google spider hit a page that required you to fill out a form to continue, it would stop there. But now Google says that in some situations, the spider will attempt to submit the form so it can find out what's on the other side.

Is this good or bad? I'd say it's more good than bad. It's good for web searchers who use Google. And it can be good for webmasters and marketers, as long as you're aware of Google's new spidering policy and you design your web forms with the Googlebot's new capabilities in mind.

Take a typical B2B landing page. It's a single page with an offer -- let's say "Download our latest white paper on widgets!". But in order to get the white paper PDF, the visitor needs to fill out the form. Under the old rules, Google wouldn't be able to get to that white paper because it was housed behind the form.

But with this new initiative, Google might try to fill out that form and get to the white paper. Once it gets there, it would spider the white paper (because of course Google can index PDFs) and the white paper might appear in search results. So if someone types in "Widgets" and your white paper is relevant enough, it could appear high in the search results and people could be viewing it thanks to Google -- without filling out the form!

So if you have critical pieces of content like white papers that you don't want to appear in Google searches, make sure you exclude those form pages in your robots.txt file. (A simple Google search can tell you how to edit your site's robots.txt file.)

Webcasts: What's more important -- leads or thought leadership?

The April 7 issue of BtoB magazine has a graph with results from an online poll they conducted about webcasts. The question was "What's your top webinar objective?" and the two choices were leads or thought leadership. Interestingly enough, 69% said their top objective was thought leadership and only 31% picked leads.

These results really surprised me. I'm sure this wasn't a scientific poll, so perhaps I should take this data with a grain of salt. But in my many years of experience conducting webcasts, I'm accustomed to most sponsors being obsessed with leads. That's how sponsors usually evaluate success -- based on number of registrants and number of attendees, plus the quality of those people. It's just the way many companies are set up right now...they're dependent upon leads.

But after thinking about this poll, I realize just how difficult of a question "thought leadership or leads" is. A webcast needs to do both to be effective, so it's silly to say that one or the other is the primary goal.

If a webcast doesn't generate leads, it's going to be difficult for the sponsor to quantify results. How will sales and marketing turn that thought leadership into action without leads? But on the other hand, if the webcast doesn't provide thought leadership, the leads are actionable but they're not nearly as valuable. After all, there are a lot of easier and less expensive ways to get leads. But the thought leadership conveyed during a well-executed webcast, combined with the fact that the person just sat through an hour-long presentation about a topic, makes for a very qualified lead.

This is exactly why I believe webcasts are so popular in B2B markets right now. It's not about the lead -- nor is it about the thought leadership. It's an inseparable combination of the two.

How much time do you spend fighting fires each day?

Today was a jam-packed day at the IW Best Plants Conference. (See yesterday's post for more). I heard a number of interesting presentations about how manufacturing companies can implement continuous improvement in their facilities. A lot of the challenges and solutions discussed today were of course specific to manufacturing, but there are some things that digital marketers can learn from too -- no matter what industry you're in.

During a session called "How to Create a Continuous Improvement Culture," David Rowland from Milliken & Company (one of the world's largest textile companies) talked about "firefighting" and how it's often a significant portion of an employee's day. How many "fires" are you putting out each day and how many crises are you solving, versus doing your normal job?

David said that the typical person in a typical company spends about 40% of their time on daily operations (the "normal" part of their job), and 60% trying to solve unexpected problems and put out various "fires." Milliken & Co. actually did a study a while back where it examined how its managers were using their time, and the numbers were amazingly close to this 40%/60% ratio.

However, he pointed out that the best companies -- like Toyota -- only spend 20% of their time on daily operations and 20% firefighting. So where do they spend the other 60%? Continuous improvement. They make their processes better. They find ways to reduce waste. They standardize routine decisions.

So how does this apply to online marketing? Well, just like the people in manufacturing operations, we can put processes into place that eliminate variability and waste. Whether it's a report your team puts together for management, a process for distributing leads to sales, etc., implement a plan to standardize these types of activities. As David said during his presentation, "People love their jobs when they need to make fewer decisions. They don't need to make many decisions when you have good processes in place."

But here's the tough part: no process is ever finished. Once you have the process in place, always look for ways to make it better, like Toyota does with its famed Toyota Production System in the manufacturing world.

As digital marketers, there are plenty of things we do that can't be standardized. But I think we underestimate the number of standard tasks we complete each day -- and you can apply continuous improvement principles to most of these. Standard practices will reduce the amount of time you spend "firefighting" and give you more time for the big, difficult, custom tasks you perform.

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!

Banners are good for more than just clicks

"If you’re only doing banners and buttons and only tracking clicks, you’re missing a huge opportunity."
-- Shawn Riegsecker of Centro, on the integration of online and offline campaigns. During his presentation at the recent Web Association event, Riegsecker talked about advertisers who saw their ROI on pay-per-click ads drop 30-40% when they discontinued their online branding campaigns that included banner ads. His point: Generating clicks isn't the only way a banner can be successful.