Today, the Internet is the marketplace of the modern world. Every day, countless business deals take place online, from trading-card exchanges to complex financial transactions. Every business with an online presence wants to maximize its digital impact: to be seen, heard, and thought of first. In this electronic business-space, it is the search engines—the ones that sift the ether—that determine who is first. As a result, those who pay a fee can have their businesses appear higher in search results. These agreements have several names, but they all refer to paid search marketing. Although there is a great deal to know about paid search, today we will give an overview of the key points.  

Basic Principles

Regardless of the pricing plan used, or who offers the service, paid search marketing is self-explanatory: clients pay for targeted search results. To be specific, paid search means paying to use the sponsored advertisements of either a search engine or a website. For example, if one were to search for “Nintendo” in any search engine, the results page would show a list of relevant web pages. Most of these are considered “organic” results, in that the search algorithm deemed them the best fit from your search parameters.  At the top and bottom of the results page, however, one will find additional web pages. If one looks closely, these results will stand out slightly from the organic results. That is because these are sponsored advertisements, offered to those that pay for them.

It is these prime placements that businesses jockey for, with those that pay most getting the top spots. Since they are strategically placed as the first and last things seen on the results page, they are most likely to be clicked. To draw as many customers as possible, businesses want a spotlight on their websites always, as with TV ads. Different search engines will have their own formats for results pages, but they have similar features. Furthermore, different engines may have different sponsored results for the same search, or the same results in a different order. It all depends on the marketing arrangements between the search engine and those who advertise on it.

Price Schemes

When it comes to paid search marketing, money talks, and the most money talks loudest. To get the best advertising spots, competition amongst businesses can be understandably fierce. The basic mechanism for paid advertisement is twofold: advertisers first devise a budget and then propose bids. The budget, naturally, is the maximum that businesses will spend on their marketing campaign. This depends on the advertiser: the larger or more successful the business, the more they can afford. Bids refer to how much an advertiser will spend per successful search. This breaks down into one of the following two mechanisms.

CPC

CPC, or Cost-per-click, means that advertisers pay for every click on their ads. In other words, when a user does a search, sees the ad, and clicks on it, the advertiser pays the search engine. Naturally, this type of price scheme lends itself more to driving sales. Businesses that have things to sell—from shoes to books—would only want to pay for a click if it led to a sale. By choosing CPC pricing, they can ensure that their advertising dollars are put towards maximizing profits.

CPM

CPM, or Cost-per-impression, works differently from CPC. Advertisers on this kind of plan pay for every 1000 times their ads show up in search results, whether users click or not. Here, businesses only pay to make users aware that their websites exist or give an impression of what they offer. This kind of price plan lends itself more to newer or less-known businesses. By choosing CPM, advertisers give priority to raising brand awareness over sales, and fostering a reputation.

Whether advertisers choose CPC or CPM, the bidding process is the same. After outlining a budget, clients set out how much they want to bid per click/1000 views. Once this is set, the search engine takes in the information, compares bids, and arranges searches accordingly. This continues until the marketing budget is used up, or until the advertiser increases the budget. Those businesses with more funding available for advertising have an advantage here.

Who Uses Paid Search?

One might think that only big businesses—multi-million-dollar corporations—make use of paid search ads. While businesses with larger advertising budgets have an edge, nothing precludes smaller businesses from making use of paid search. Businesses who cover a niche market—a unique product or service, could make use of sponsored ads on a smaller budget. Since they have fewer competitors, these businesses would have fewer, if any, competing bids for the best ad slots. Businesses are not the only ones that use paid search. Academic institutions: universities, colleges, and technical schools, can bid for sponsored listings. Likewise, those that provide specialized services: medical or dental clinics, or nutrition experts, can use paid search. If an advertiser has something to advertise and a little extra money, they can use paid search marketing.

Services by Search Engine

There are several search engines that offer distinct services. While every engine runs sponsored listings, there are those that go the extra mile. Perhaps the best case to illustrate this would be that of Google AdWords.

Google AdWords

The largest cash cow in Google’s electronic stable, AdWords offers an extensive advertising package. In addition to CPC and CPM, AdWords runs ads on website banners, as well as text and rich media ads. Those that run ads here can show them on the Google Search and Google Display Networks. The Google Search Network includes Google Search, Shopping, Maps, and other Google services. The Display Network comprises those websites that partner with Google, such as Blogger or YouTube. This gives prospective advertisers a wide audience to market to.

For both CPC and CPM pricing, advertisers set a maximum bid amount. For those that opt for CPC, another option is automatic bidding. Here, Google can select a bid amount on the client’s behalf. This can streamline the bidding process for clients, although they would need to maintain full awareness of their advertising budget.

AdWords also offers the ability to run targeted marketing campaigns. Here, advertisers can specify how they want to run their ads: by the time of day, location, and type of device. This is especially useful if advertisers have a good idea of their target demographic. For example, if their ideal clients prefer to shop via smartphone, they can increase their bids for phone ads. If they know that their customers can only shop on given days, they can spend more for those days.

Benefits of Paid Search

As one can imagine, using a paid search marketing service offers many advantages.  The following are some of the key points to consider in a paid search campaign.

First Sight of Customers/Clients

The most obvious benefit to using paid search is that it gets a website to the top of the results page. For any business that advertises online, being noticed is crucial. When a user loads a web search, advertisers need to get their attention as soon as possible. This is why the sponsored ad slots are placed at the top and at the bottom. This makes them the first and last things that users see. While the top spot is preferable, so long as a business secures an ad in the top five, they have a good chance of a click. This can be doubly important for businesses that are new to e-commerce.

Tracking

While advertising through conventional media can be more of a gamble, paid search lets advertisers track their investment. Since search engines can receive substantial amounts for marketing clients, they tend to be diligent in how those dollars are spent. Advertising clients can track their entire ad campaign down to the last penny. This gives a much more accurate assessment of return on investment. This kind of tracking is also useful for advertisers that need to test out new campaigns.

With sufficient funds, advertisers could run multiple campaigns concurrently, to see which gives the best ROI. Conversely, if an ad campaign is not working, this gives clients an opportunity to terminate it or redesign it. By tracking the minutiae of an ad campaign, advertisers maintain more control over how their ad dollars are spent.

Speed

Going together with getting ads to the top, paid search also offers the advantage of speed. For those familiar with Search Engine Optimization (SEO), it is possible to achieve similar results organically, at a fraction of the cost. However, boosting search rankings this way takes a considerable investment in time, effort, and knowledge. If one does not know how to do SEO, it takes time, and possibly money, to acquire these skills. Even with training, one must invest the time and thought in designing one’s own ad content.

After this, search engines need more time—months or more, to accumulate enough data to rank web content accurately. If one goes the SEO route, one can achieve similar results to paid search, but only after months of work. For new businesses, this may be more time than can be afforded. In cases like these, the more economical option may be paid search. By making a cash investment, businesses can get professional, strategically-placed ads in an hour or less, saving considerable time.

Build/Maintain a Reputation

Although a large budget is an advantage, cost is not the only thing search engines look at. To maintain the integrity of their services, search engines must ensure the ads they put out are trustworthy. They need to be certain that their ads lead to meaningful content, and not spam pages, or sites containing malware. To keep their ads honest, search engines track quality scores, to ensure an ad is relevant to a user’s search parameters. By maintaining a paid search campaign, and making sure their content is valid, businesses can establish their online reputation.  When their websites appear on top of a results page, advertisers can take pride in the fact that their content passed inspection.

Identify Customer Trends

Businesses that advertise online should already know, or have a good idea about their target customer. If a business has done its research, a paid ad provides confidence that anyone who clicks it wants to buy. That said, paid search services can also provide additional information about customers, such as location, time spent, device type, and specific pages visited. This way, advertisers can also get a sense of any emerging trends. For instance, if there are more customers in one location than another, it makes sense to advertise more in that other location.  

If customers that buy an advertised product also tend to buy another, it could be of benefit to advertise that second product. This way, advertisers can continually refine their marketing campaigns to maintain their success. By spotting new trends in advance, as well as existing ones, advertisers ensure their budget is used with maximum efficiency.

Drawbacks to Paid Search

Although paid search marketing offers many benefits, no system is perfect. Before opting to make use of a paid search campaign, there are several additional factors to consider. If any of the following would pose a problem, then advertisers may want to consider an alternative.

Cost

This can be one of the larger limiting factors for paid search, especially if a business is new. While a business can get started in paid search with a small budget, as mentioned before, it is a bidding process. Newer businesses that end up bidding against established ones can feel outclassed if or when their pages rank lower in the sponsored listings. If advertisers believe they are competing against a larger-budget business, they should consider how much they need the top spot. If a business is simply one of the first results seen, that may be enough. If, however, a business needs to be the first seen, but lacks funding, they may need an alternative to paid search.

Issue of Transparency

Another pet peeve of prospective advertisers can be the bidding process itself. While businesses can track their own ad expenditures, there is no option to compare bids. This can leave some advertisers with questions about the transparency of the bidding process. Businesses can wonder if their bids are worthwhile, especially if they know who their competitors are. It is possible to assess their efforts by raising their bids and re-checking results, but this may not always be feasible. If several adjustments to a bid have little effect on search results, a business may want to consider other options.

Click-fraud

Since paid search is a bidding process, its very nature is competitive, which some use as an excuse for unethical behavior. The most relevant example is click-fraud, where a competitor clicks on a rival’s ad without buying anything. This artificially raises advertising costs, eating into a business’ profits. This is not to be confused with exploring a site without making a purchase; click-fraud is malevolent and intentional. On a small scale, click-fraud may be only irritating, but a large-scale, coordinated effort can make advertising unprofitable, possibly ruining a business.

One would hope that click-fraud is the exception, not the rule, but one must be aware of the risk. Tragically, besides monitoring traffic and identifying unusual patterns, there is not much a business can do to counter click-fraud. Unless one has conclusive proof that a competitor is engaging in click-fraud, a business can only seek other marketing venues.

Alternatives

Paid search is an excellent way to market a business, but it is not the only way. An organic marketing campaign can make headway, if one wishes to put in the effort. One way to gain an edge is to offer a unique product or service; if one carves out a niche, one has fewer competitors. Social media can also help a business spread the word, if one has a large enough network to leverage. Finally, if one’s business is small-scale, that makes it more personal, which can be a hidden advantage. By engaging with customers on an individual level, one can establish a reputation in real-time.

In summary, there is much more to learn about paid search than we could cover in one article.  What we have discussed here are simply some of the key points that an advertiser should keep in mind. To devise the best marketing campaign, a business should know their product or service, their customers, and their competitors. With those things in mind, an advertiser can determine how best to market their business.

Author: Garenne BigbyWebsite: http://garennebigby.com

Founder of DYNO Mapper and Former Advisory Committee Representative at the W3C.