Tuesday, January 15, 2008

Should you be paying for the clicks on your brand keywords?

When you do a search on your brand name or your company name, chances are that you will have you company’s site listed as the top organic result. If it is not then you should first learn about Search Engine Optimization before reading this post (email me and I can help you with all your SEO/SEM needs).
It is also very likely that there won’t be any paid listing on the SERP (Search Engine Result Page) when you do a search on your own brand name.
If you do buy paid search listing, it is going to appear just above you’re your own organic listing. Is it a good idea to buy the paid listing and pay the money to Search engine for something you could have got for free (next listing after paid is also yours)? And visitor by searching on your brand name has shown their intent of visiting your site.
If you use an agency, I am sure that your agency is already buying your brand keywords and showing you how good your conversion is on your aggregate keyword buy. Well if a consumer is already looking for your brand name then their intent is very clear, they are ready to be converted. A lot of users use brand keyword in search to get to a particular site, they use built in search functionality in their toolbars (Google, yahoo, msn etc) which then takes them to SERP of the toolbar provider. If a user is looking for your site and you know you will be number 1 in the SERP, does it make sense to buy a keyword? Isn’t it unnecessary? Won’t you be wasting your money?
Some might argue that buying that keyword reinforces your brand name and your site in visitors mind and hence you will result in more click-through, visitors, conversion and ROI. But how can you be sure? That’s exactly what I am going to show you in this article.
The first and foremost thing is to understand what value you are getting from your search marketing efforts, paid and organic. Once you understand the complete impact of both types of Search Marketing efforts you will be able to make an informed decision. A decision that will be based on your ultimate business goals e.g. increase site traffic, increase conversion, increase ROI or a combination.
Here is my 5 step process to determine if you should buy Paid Search on your brand name keyword or not.
  1. Configure Web Analytics Tool: The first step is to configure your web analytics tool so that it can measure and report on the traffic for your brand keywords in 3 separate segments, paid, non-paid and total,. Below is a screen shot from Google Analytics showing paid, non-paid and total for a particular keyword. (I will not cover how to configure your tool since they all have different configuration. I will be able to help you if you email me).



  2. Develop Baseline: Develop a baseline for total traffic and conversion for the three segments (paid, organic, and paid and organic for your brand keywords). See how much traffic is generated by each segment and how much of that traffic is converting.

  3. Test: This is the crucial step in determining if you should buy your brand name keyword or not. If you are not currently running paid ad then this step is much easier than if you already have the paid search running. If you already have the paid search running, you have to be willing to take a chance to do this test. It might not work out in your favor but unless you try it you will never know.
    1. Paid search already running:
      Stop the paid keyword for your Brand Keywords – Stop the keyword for time enough to generate significant traffic and conversion data.

    2. Paid Search Not Currently Running:
      Start the paid search for your Brand Keywords - Start the paid search campaign for time enough to generate significant traffic and conversion data.




  4. Report the numbers: Report the new number with your baseline. Putting them side by side will help in easy comparisons (See the example below)

  5. Analyze the data: Let’s take a look at an example which will help you with analysis.


Example:
Let’s look a company, whose brand keywords generates on an average of 150 searches. Let’s assume that conversion rate on these keywords is of 50% , cost per click on paid placements in $0.50 and profit margin on each conversion is $3
A typically time period, when you have both Paid search running, results in the following data


Table 1


You get 100 click throughs, 80 from organic and 20 from paid.
* Total Profit on Paid Efforts = (Profit Margin on Conversion * Conversion resulting from Paid Search) – Total Cost of Paid Search. This calculation only uses CPC cost and does not include agency and other direct or indirect cost. Other costs associated with buying, placing and reporting will further add to total cost.
So far, it all looks good, your paid search efforts are paying off and you continue to keep buying your own Brand name keyword.
Now stop running the paid searches.
Now let’s take a look at numbers when you stop running the paid search. Using the same assumptions as above
  1. A conversion rate of 50%

  2. Cost Per Click of .50 cents

  3. Profit Margin on each conversion is $3




Table 2

* Total Profit on Paid Efforts = (Profit Margin on Conversion * Conversion resulting from Paid Search) – Total Cost of Paid Search. This calculation only uses CPC cost and does not include agency and other direct or indirect cost. Other costs associated with buying, placing and reporting will further add to total cost.

Since there is no paid search listing, all of the 100 clicks (assuming same number of clickthoughs) will go to organic. Say now instead of 100 (that you got when you had paid search running) you only get a toal of 96 and rest of the 4 go to your competitor or somebody else who shows up under your brand name in organic listing.

Now we have all the data we need, let’s put them side by side and compare



Table 3

Paid search placements result in a total of 100 (from paid and organic) while only organic results in 96. Your cost per conversion from paid is $1.00 and you are making $20 in profit from your paid search efforts. It all looks good.
Now, let’s take a look at the results in another way.


Table 4
*Assuming you have basic SEO for your brand keywords.
**Cost Per Extra Conversion = Cost for paid search/(Additional conversions you gained by running paid search)
As you see above you only get 2 more and not 10 conversions by participating in paid search.

You only get 2 more conversion by paid listings and not 10 as paid listing report was showing. You got 48 conversions when you stopped paid listings and 50 when you used paid listing. So effectively you paid $10 for 2 more conversions. That is $5 per conversion not $1.00 as you agency might have reported on your paid search listing report.


So in light of this information, here is your profit and loss statement.


As you see above you have a loss of $4.00 instead of a profit of $20 on your paid search efforts on your Brand keywords.

Note that above example in only for illustrations so you have to look at your own number and test them to see if you are making or losing money. As I showed above this issue is really significant on branded keywords but you should apply the same login to your non-branded keywords too and see if you are losing money or making money by participating in paid search.

Please send me an email if you would like the excel sheet for these calculations so that you don’t have to recreate it. Also email me if you would like a PDF version of this post.


Here is an example where, I think, the company is losing money by buying their own brand keyword.

They should probably file a complaint with Google to not sell their brand name to the ToyRMall (listed on the right hand side sponsored listing) and not but their own brand name keyword. Most of the listings on the first page of SERP point to ToysRUs site anyway.


So are you wasting money? Chime in.

Even though I have written about the brand name keyword, you should do this exercise with your top keywords to make sure you are not losing money.

Note: After I had written this post, I found out that Gary and Gary had also written post on this same topic (Thank you Jaimie Scott, for sending me these links).