Pay-per-Click Observer

It’s been a while, and so I’ll spew forth on the topic of forecasting just to break the silence.

The other day, a client said to me “we forecast with everything else, why not PPC?” That got me thinking. Why not? Surely, Google and Yahoo will have massive amounts of data from which to draw estimates? So I did some tests. I pulled forecasts from both places and, without getting into the details (mostly because I didn’t save them), they were completely useless.

Thinking about it, I came to understand the problem pretty quickly. How would they know how my ads will perform? Say I choose to bid $.50 on “foreclosure lawyers.” What kind of creative am I running? What happens if, as I almost always do, I change my bids every couple of days? What if a planeload of foreclosure lawyers crashes into Mount Rushmore?

There’s no way to know ahead of time all the myriad variables that can affect a PPC campaign dramatically. If my forecast is to be useful for anything, it has to be at least somewhat accurate. These vendor-supplied estimates weren’t even in the ballpark.

Typically, they overstated the results– drastically. I have to assume that this is done in the interest of creating, well, interest. They would like you to think that you have this massive well of inventory from which to draw for your campaign. The assumption that no one will come to your party if you throw it is a real wet blanket on anyone exploring the idea of a PPC campaign.

Still, I want to be able to give some kind of answer. The best results I’ve seen come from my own historical data. Since we keep all of our campaign data back to the beginning of time, we have our own, reasonably relevant, data from which to derive our forecasts. By performing a regression on that data (and adjusting it for known seasonal and budgetary non-linearities), we come up with numbers that, while still rough, are at least good “magnitude of order” estimates.

In most cases, that’s good enough. No one really expects us to be able to accurately predict the future.

In the case of new or test campaigns, though, I will stick to my guns and tell my clients that we just don’t know. We need to run them for a while and see what happens. There is just no substitute for truly relevant empirical data.

Seems that I’d forgotten to open comments back up after installing my spam filter.

Oops. My bad. They’re open now.

Thanks for catching that, Sean.

I’m a Google fan. At least, I’m a fan of the folks with whom I work within the context of AdWords.

What I am not a fan of is bullshit. There have been a couple of announcements made by Google that have ticked me off– not really because the actual thing happened, but because I don’t appreciate being patronized.

I understand that Google is a stock market bubble just waiting to burst. I don’t really blame them. They’ve been attractive because they’ve grown like a rocket. That simply can’t last forever, and in a market in which valuations are based on forward looking numbers, not continuing to meet outlandish expectations is somehow the equivalent of horrible failure.

Fine. So, Google’s a monopoly, and they’ve been printing money. Whenever the printer appears to be slowing down in the slightest, an “improvement” is made for the sake of “quality.” The last winner was the minimum bid.

In case you’re unfamiliar, that means that if you bid on something that Google thinks is worth $5/click, they’ll set that as the minimum bid. You don’t bid that much; you don’t run (theoretically). This was announced as a way to help relevancy. That, my friends, is bullshit. If I decide to run an ad for something completely unrelated to the keyword, and I’m willing to pay the piper, suddenly, I’m relevant. I have an ad that’s spot-on relevant by every measure, but if I’m not willing to pay, it doesn’t play.

Now, they’ve announced that they are going to stop using your actual bid to determine your position on the page. Instead, they’re going to use your maximum bid. Thus, you can crank your maximum bid and rise. This, according to Google, will:

“offer advertisers more control over achieving top placement while increasing the quality of our ad results for users.”

So, if I get this right, by allowing advertisers to simply buy their way higher, this will improve the experience for users?

If those users are stockholders, then yes. Maybe.

“This is due to more high quality ads becoming eligible for top placement, thereby allowing our system to choose from a larger pool of high quality ads to show our users.”

I call BS.

Again, I have to repeat, it’s Google’s business, and like it or not, they are by far the dominant player. I happen to generally like that. What I don’t like is reading things like the above quote. You need to make more money? Just say:

“Google has decided to change the algorithm in the interest of allowing advertisers to have more control over their position by allocating more money to their ads.” or “Google has determined that maximum bid more accurately reflects an advertiser’s willingness to pay for their position on the page.” or “Google has changed the placement algorithm. Suck on it.”

No one knows how their position is really determined anyway. This announcement is probably, like minimum bids, a headfake to spur advertisers to raise their maximum bids– just in case.

I’m of the opinion that, like it or not, Google is dealing with an auction scenario, and no amount of shifting the rules around is going to make much difference in terms of what people are ultimately willing to pay. If I decide a click is worth $.40, it’s worth $.40. If I can’t get it for that, I won’t buy it. If they won’t let me run it because it doesn’t make their minimum, I won’t. I don’t really care what the new rules are.

I would guess that Google knows that. They probably have an economics PhD working there who’s explained market theory. If they want to generate the most revenue, they need to find the place where the most dollars can effectively be spent. It must be something akin to an efficient market with this many people playing.

Instead, it appears to me that they’re going for the airline system: first class pays a premium to run whatever ad they want wherever they want; coach tries to run their ads at a level that makes economic sense and gets whatever position first class has passed on.

Still, it’s their business. Until the landscape changes (don’t hold your breath), they get to arbitrarily make the rules. I just wish they wouldn’t tinkle on my leg and tell me it’s for fire prevention.

I received a mail today from a site that ranks the “top” search engine optimization firms. I get these all the time. There are a couple out there these days that seem to have assumed the mantle of official SEO evaluators.

‘We exist to help customers find the best firm for their SEO/PPC work!’

Oh, really. Well, it seems to me that they would then just ask for a couple of references and get to work ranking, right? Clearly, if I had to pay to be considered, it would be a conflict of interest, no? I mean, Consumer Reports doesn’t even accept the product they’re evaluating from the company to avoid any appearance of such a conflict. Surely, this helpful ranking organization would not expect SIX THOUSAND DOLLARS to “consider” me for their rankings?

Oh, yes, they would.

This is nothing but an unethical promotion scheme masquerading as objective recommendations. I am a little amazed that some of my colleagues, who otherwise seem like perfectly responsible people, would participate and attach their names to this kind of thing.

How is a customer supposed to feel when they realize that this “ranking” was purchased? You, the SEO ‘professional’, have collaborated with a deceptive marketing practice to present yourself in a favorable light. And now your customer is supposed to trust you to be honest with them?

Here’s a good joke:
Q: “What’s the difference between a Gold member and an Official member?”
A: “About $5500!”

It’s gotta be hard to be an ethical mortgage broker, car salesman, or stock broker. Every day, you’re confronted with people in your industry doing whatever they can to separate people from their money. It’s not like you can’t make a living just doing what you do honestly and acquiring customers as a result of doing a good job. Still, the lure of Fast Money is out there, and it makes people do things that I’d guess they’d hate to admit to their children. I feel that way more and more every day in this industry.

Dear potential customer, I am not an official member. I am not ranked. I have some certifications, but they’re really not worth much. The best thing I can suggest is that you talk to me and, if you’re interested in learning more, talk to my clients. They’ll tell you if my service is worth what they paid me.

Wait, I now recall that I recently did do exhaustive research and discovered that I am ranked in the Top 3 of PPC providers world-wide! I am also a Triple-Diamond Ultra Member.

I did that just for you. You’re welcome.

PPC bid management was much easier when I started out.

First, I didn’t know what I was doing. That always helps to make things seem easier.

Second, you could actually see your position based on your bid. That’s a pretty dumb thing to fixate on, but if you review the first thing, you’ll see why I thought it wasn’t. You’d just announce “I want to be #2 for these words!” and you’d know just what to bid. I wrote all kinds of code to go to the Overture (now Yahoo!) site (the only game in town for a while), pull all our bids, and adjust them $.01 over our competition for our chosen position. I was so smart (see previous paragraph.)

These days, I’ve been at it long enough to know that generally applied bidding “strategies” are usually counter-productive. Bid management must arise from an understanding of the goals of the particular campaign and a regular looping back with analytics to continually tweak– first for large improvements and later for maintenance and small improvements. Sometimes, conversions are key regardless of bid. Sometimes, the cheapest click is the best click. Usually, it’s something in the middle.

Foolhardy experiments should be done periodically to challenge current assumptions and try out new things. If this ongoing tweaking stops, spend gets out of whack, CPC creeps up, opportunities are missed, and the campaign starts to, well, rot.

What’s more, the Google and Yahoo! have both moved to a system wherein you can’t tell ahead of time what your position will be. Your position is determined by something called a “quality score” which reflects your bid and your click-through-rate. However, it’s opaque to you, the advertiser. It could involve the phase of the moon or some internal strategy to “mix-up” results. We’ll probably never know exactly.

So, that means, you just can’t know what your bid has to be to hold a given position– though Google will allow you to opt in to a position preference, but you then don’t know what your bid will do. That just sounds like such a bad idea to me in about three different ways.

So now we know that nice, simple bidding strategies don’t really work anymore (or ever). In part 2, I’m going to talk about why you can’t necessarily just increase your bids to get more clicks and why there’s no such thing as the “optimal” bid. Prepare to have your mind blown. Groovy, baby. Yeah.

“How much do you charge?”

It’s one of the first things anyone asks me– even before “do you have any idea what you’re doing?”

The cost of hiring a PPC agency varies all over the map. Some charge by percentage of spend, some by the hour, and others charge a flat fee per click or month. To tell the truth, I don’t believe that it matters much. Ultimately, if you understand your business, it’s a little bit like differentiating between a carpenter who charges by the board and one who charges by the hour. Who cares as long as you get your house done for a price that makes sense?

We’re among the first group. We generally charge as a percentage of spend. We do so because we feel that it’s a pretty good estimation of the amount of work that we’re going to be doing on a campaign, and it allows us to scale the engagement without constantly revisiting our fee.

I say “generally” because we often run into a situation where we’re advising on interactive marketing more than managing a PPC campaign. Sometimes, there’s no PPC at all, and we’re reviewing another agency’s work or a site specification. Other times, we’re running a test campaign that has a small budget but requires a disproportionate amount of attention to setup, management, or analysis.

In those cases, I pretty much just pick a number.

“HOW DARE YOU?!”

Really. I just pick a number. I guess it’s based on hours to some degree. More accurately, it’s time required balanced against potential long-term engagement weighted against how much I feel like doing the job divided by how much I like the person asking me the question.

I know what you’re thinking. “I’d NEVER hire that guy.” You wouldn’t be the first. It’s OK. We can still be friends.

I also usually add that you should only pay me that fee if you think what I did was worth it. In ten years of doing this, I’ve been “not paid” my fee exactly zero times.

By now, you probably won’t be surprised to hear that I rarely sign contracts with my clients. I’m perfectly happy to sign them, but it usually doesn’t come up. I’m talking big, name-brand engagements, too. Sometimes not even a handshake if they’re too far away to reach without getting on an airplane. I have sued or been sued exactly zero times as well.

My point is that we’re all very different and you first need to know what it is you really want from the provider. Make a list before you ask anything about fees.

Think about some of these things. Does your prospective provider:

• Make you feel comfortable personally?
• Have experience managing campaigns of your size and/or type?
• Have references from current/recent clients?
• Speak and write in a way that makes you feel confident in their ability to communicate to you and your customers?
• Know how to write custom tools if necessary?
• Understand marketing as a discipline and speak the language?
• Charge by the acquisition? By percentage of spend? By the click? By the hour? Which do you prefer?

Then, ask yourself how much you want to spend. Don’t ask the provider “how much should I spend?” unless you go into car dealers asking how much you should spend on your car. Be realistic about your goals and constraints and share those with your prospective provider.

Do you just need advising to figure that out? There you go, you just started your list of things you need to hire someone for.

What not to do?

“Hi, how much do you charge? OK, that’s pretty cheap, what do you do?”

I had the pleasure of sitting in on a webinar today on PPC and “relevance.”

It reminded me of listening to Deepak Chopra speak. He makes points that you can’t really argue with. Well, not points, exactly. He makes statements that you can’t argue with. The point never really comes. Peace is nice. Love is good.

Yes. And?

Well, this webinar was not much different. Conversions are higher if keywords relate directly to the product for sale. Getting a lot of clicks is no good if you don’t accomplish your goals.

Yes. And?

This lecture came complete with a formula containing factors like “motivation.” It’s four times as important as anything else. Four times! That’s a lot. The client with whom I was listening to this presentation told me that her motivation was a solid two while listening to it. I guess that makes eight.

I’ll give this speaker credit for his cynicism about modern marketing as a function. Rather than striving to clearly explain the benefits of a good product or service, marketers often find themselves addressing the shortcomings of their product by tricking the user or finessing the message.

Ironically, the majority of this presentation took a couple of relatively simple concepts and tried to cloak them in pseudo-scientific formulas and theories. Why do that? In order to finesse the message and sell a service. They could touch on the deeper meaning of these formulas today, but you’ll need to take a class from them to really have them explained.

I’m guessing it has something to do with vibrations.

I was looking at the cost-per-acquisition results for a campaign that we’re managing, and some of what we’re doing reminds me of those stores at the strip mall that advertise ‘Free Whatsits!’ So, you walk by and think, ‘Hey! I might like a whatsit if it’s free!’ and you wander in. Eventually, the over-eager salesperson comes over and asks if they can help you.

-Yeah, I’d like a free whatsit.
-Great, OK, well, what I need you to do is fill out this form…
-Why does it want my credit card number?
-You get to use the free whatsit for two weeks, and then, if you don’t come back to the store before the end of that, you’re automatically signed up for a subscription of monthly whatsits.
-Uh, that doesn’t seem free. That seems… like a trick.
-Sir, please don’t raise your voice with me.
-I didn’t… it’s just…
-You didn’t fill out your cell phone number, sir.
-My cell… I… why would you…
-If you read the application, you’ll see that you agree, in exchange for your free whatsit, to receive calls from our business partners to let you know about great values in whatsit related merchandise and services.
-I don’t want that. No, no, that would be no good. Please don’t do that.
-Sure, yeah, I understand, but it’s part of the promotion. Sir, please stop grabbing at your application! Sir! Come back here!

<And, scene!>

Now, don’t get me wrong. I’m all for incentives, free trials, and the like. As advertisers, though, we are not doing ourselves or our prospects a service by misleading them with ads. We need to be careful to explain exactly what it is they’ll get by taking the detour that PPC provides. Is it free, or a free trial? Is it free with a subscription? Is it free with a purchase?

It’s not just an ethical issue. It’s a campaign performance issue. Why fake someone out? If they come in expecting something other than what they get, you’ve spent the money on the unqualified (in fact, just the opposite of qualified, anti-qualified) lead, and they’re likely to grab their application and run out the door cursing at you(r brand).

I want my clicks to count– even if it means getting fewer of them. I also don’t want to do anything to risk my client’s brand. Even feeling this way, I see that some of our ads might be approaching that line depending on the interpretation. And that’s no big deal as long as we’re thinking about these issues and considering them with each ad. It’s easy to fix before it becomes an issue. You’re not likely to get yourself up a creek if you make it a habit to check your paddles every time.

I recently submitted an analysis of a client’s site design spec for search engine marketing issues. In general, the spec was surprisingly good. ‘Surprisingly’ because, normally, SEM is given little, if any, thought in the design process– though that’s changing. Still, this spec mentioned some of my favorite things: separating design from content, semantic HTML, etc.

So, I did my report, praised their good preparation, and suggested a few more things that I thought would help to get this design implemented in a way that didn’t throw up any long-term impediments to the ongoing process of SEM.

The first response that I received from one member of their team was, essentially, “you didn’t say anything about our design. Are there things in our layout that will effect our ranking?”

So, in these cases, what’s my job? I’m presented with a design that someone has obviously given a lot of thought to. The person who brought me in on the job is a smart, experienced marketer. She has clearly considered branding issues in depth to arrive at this design. Is it my job to say “OK, first thing, we need to list your products on the homepage. Let’s expand that nav. Ditch the whitespace for text descriptions…”

I don’t think so. Not everything is about SEM. (Gasp.) I see my job as applying my knowledge in such a way that her vision is implemented in the most search-engine friendly way possible. I have made the comment that, basically, “more text is better.” But, again, if I were to approach Steve Jobs and say “hey, Steve, if you’d lose that big iPhone on the homepage, you could include a paragraph about your products and market segments…” he’d give me that patented Jobs blank look before someone whisked me away.

SEM starts at the beginning. Why are you making the site? Is it more important to be consistent with your identity or to get some more clicks from Google? The best performing sites on the search engines are sometimes the ugliest and least usable.

I’m not about to advise anyone to sacrifice good design, good usability, and well thought out strategy in the interest of moving up the SERP rankings.

That’s not my job.

Synchronicity…

I just got off a call with a company looking for some help in determining the appropriateness of PPC for their purposes. They want me to help them design and manage an experiment to see if we can revisit the subject after an in-house experiment left them with a really nasty taste in their mouths.

I made note of a couple metric-related issues that were core to our conversation that I wanted to mention given my previous article.

Specifically, the client is currently using affiliate marketing. Interesting thing about affiliate marketing: it’s perfect when the cost-per-acquisition is determined by something that doesn’t cost anything– a trial, let’s say. Affiliate marketing aligns the interests of that particular seedy underworld into a well-oiled machine for generating clicks and sign-ups. The only problem is that all those people who were inspired to get you to pay for a “lead” are usually less inspired to give you any “revenue.”

Suddenly, the $100 that a paying customer should generate for you becomes $2.50 when averaged out over the population of leads. That, in turn, drives the reasonable CPC down, which drives you to lower and lower quality traffic. Ah, metrics.

Another complicating factor in this case is that there’s a download associated with this client’s service. Viewers see the PPC ad, click on it, and bail before they ever get close to opening their wallets.

Well, what if we told them that the download was required? What might happen? The prospect would see the ad, realize that they’re on a dial-up, and just skip the whole thing. Click-through-rates plummet! Oh no!

On the other hand, maybe what we’re doing is setting expectations appropriately. Maybe we’re “pre-qualifying” our prospects. I used to take every call for potential work. Every email got a call back. Now, I probably return 1/10. Does that make me unresponsive? I don’t think so. I think it means I waste less of my time and less of the prospect’s time.

I don’t do $200 engagements. I don’t build web pages. I don’t market ringtones.

The best thing I can do is ignore those requests. If I have time and they seem genuine, I’ll let the non-prospect know, but if I even did that every time, I’d be sending “no thanks” emails every night instead of playing with my kids.

The same thing applies in PPC. Let the user know what they’re going to get. Don’t try to trick them into visiting you. If you know that there’s something about your offering that is getting in the way of the flow, point it out or change it.

Ebay used to seem to buy ads for every term under the sun. Even I once clicked on an ad that told me that I could “Find Pope John Paul II” there.

I checked. He wasn’t there.